How Emerging Markets Are Faring In A Post-China Economy

Ted

FYI: Emerging market economies have had a tough go of it lately. China’s market collapse left a void in the commodities space – a space that developing countries rely on for growth. According to the World Bank, emerging market economies have been set back decades as a result.
Regards,
Ted
http://mutualfunds.com/news/2016/06/10/how-emerging-markets-are-faring-in-a-post-china-economy/

Sven

All the bad news appears to have been priced into emerging market funds, so any good news translates into gains almost immediately.

Other parts of EM besides China are not in good shape either. Think there is more downside risk in the near term.

jstr

There have been "questionable" periods for equities over the markets' histories. Yet, over a long sample, the use of a bi annual switching strategy involving investing in: 1) a blend of Emerging small cap and U.S. Small cap value from Nov 1 to May 1 and 2) the utilities sector / cash * from May 1 to Nov 1, has produced a risk adjusted 380bp CAGR return premium vs. buy & hold Emerging small cap / small cap value blend. The addition of U.S, Large Cap to the blend has also produced returns premium.

CAGRs
1954 - 2016
Blend / Utilities, cash = 20.9% vs. Buy & hold 17.1%
1954 - 1983
18.7% vs. 17.9%
1984 - 2016
22.3% vs. 15.6%
2000 - 2016
17.8% vs. 11.6%

% of 5 year rolling CAGR periods > 100% ( 1954 - 2016 ) = 79%
% of 5 year rolling CAGR periods 50% - 100% = 14%
no losing 5 year rolling CAGR periods


* Application of a "Risk profile" variable determining forward year's equity market "risk". High Risk profile year = allocate to cash May 1 - Nov 1
High risk years falling in sample: 1956, 1962, 1969, 1974, 1978, 1981, 1982, 1990, 2001, 2002, 2008, 2015, 2016