Emerging market stocks have been the perennial underdog for the last half decade. Their persistent underperformance has been blamed on commodity fluctuations, currency woes, and a host of other fundamental headwinds. Nevertheless, these regional stocks are making a bold statement in the first quarter of 2017 that may ignite further interest in their ongoing growth potential.
A screen of the top performing, non-leveraged or inverse exchange-traded funds through the first three months of the year reveals a pointed theme. Brazil, China, India, Argentina, and other emerging market indexes mounted the strongest returns of all asset classes. Of those nations, smaller company shares were the biggest standouts.
Investors who have held onto their U.S.-focused dividend ETFs have been rewarded in both income and capital appreciation during the breadth of this bull market. The combination of relative momentum, low volatility, and steady accumulation of quarterly distributions have been the hallmarks of this steady trade.
Yet, those who study market history know that price performance that outstrips company fundamentals comes at a cost. Namely higher statistical valuation measures, alongside slowly decreasing yield for new investors. As a result, dividend stocks that looked attractive several years ago are now starting to rise into the expensive zone relative to other global opportunities.
Investors are likely feeling emboldened by the strength of stocks as we close out the final month of 2016. Bullish enthusiasm can be infectious and now the race is on to determine which sectors or regions will be the top-performing areas of the market in 2017. While there is no way to know where the winner will be ahead of time, there is one noteworthy area that has piqued my interest – emerging markets. Read more
The churning in the stock market has created little net gain in the major domestic indices over the last four months. In this video, I look at areas of the market that are showing strong momentum, alongside those that should be viewed with caution. Charts include: large cap stocks, technology stocks, U.S. dollar index, emerging markets, interest rates, and municipal bonds. Recorded on October 25, 2016.
This morning I was invited to appear on the Benzinga Pre-Market Prep Show. The hosts interviewed me on a wide range of ETF topics including my thoughts on building simple portfolios, knowing what you own in an ETF, emerging markets over the next 10 years, and the new Catholic religion ETF.