Emerging markets’ history of high volatility and low returns has hardly been attractive for investors. Despite overly optimistic views from promoters like the World Bank, $100 invested in EM equities in 1989 would be worth $1,450 today, compared to nearly $2,000 if invested in the S&P 500. This underperformance has been driven by the frequent and severe crises from which, compared to their developed counterparts, emerging market indices are less likely to recover.
Paradoxically, these crises are caused by EM bulls who inject vast amounts of capital into these markets, causing them to crack either from unsustainable growth or from negative macroeconomic effects, such as widening current account deficits or high inflation. When that happens, those same promoters are quick to pull their capital out of the country, amplifying the crisis even further.
But what if investors simply invested in the months after these crises, rather than buying-and-holding emerging markets investments?
We studied every EM crisis since 1987 (71 crises over the 18 most tradeable markets) and found that it can be possible to reap excess returns by only investing in the two years immediately after a crisis, an approach we call “crisis investing.”
We have distilled our study of emerging markets crises into a 56-page in-depth report. Over the next three weeks, we will highlight a few key sections of the report. We have also included a link to the full report below. We hope you enjoy reading our new study.
Disclaimers:
This does not constitute an offer, solicitation or recommendation to sell or an offer to buy any securities, investment products or investment advisory services. This information generated by the charts, tables, and graphs presented herein is for general informational and general comparative purposes only.
This document may contain forward-looking statements that are based on our current beliefs and assumptions and on information currently available that we believe to be reasonable, however, such statements necessarily involve risks, uncertainties and assumptions, and investors may not put undue reliance on any of these statements.
References to indices or benchmarks herein are for informational and general comparative purposes only. Indexes are unmanaged and have no fees or expenses. An investment cannot be made directly in an index.
The information in this presentation is not intended to provide, and should not be relied upon for, accounting, legal, or tax advice or investment recommendations. Each recipient should consult its own tax, legal, accounting, financial, or other advisors about the issues discussed herein.
