th This shift is significant for a number of reasons. First, it illustrates that economic growth is not uniform. Commodity-based economies such as Australia and Canada are pulling away from the rest of the world, and mostly avoided the banking problems that the U.S. is still trying to unravel.
Emerging market economies such as Brazil, South Korea, and China are also experiencing greater than expected growth. These countries, which are not burdened by large government spending programs, are enjoying increasing interest by stock and bond investors.
Most of the buying of foreign investments is predicated on the concept of a domestic economy that holds less sway internationally. Indeed, based on both economic and population growth, emerging market countries are expected to out-consume the U.S. by 2011. The following year, developed world gross domestic product is expected to be eclipsed by emerging market GDP. Fiscally, debt as a percentage of GDP in these countries is only 6%, compared to 13% in the U.S. The combination of greater growth and a healthier balance sheet make a strong argument for increasing international diversification.
Ben Warwick (ben@qesinvest.com) is chief investment officer of Quantitative Equity Strategies LLC in Denver, and Memphis-based Sovereign Wealth Management, Inc.
See More of Ben Warwick's Portfolio Diagnostician Blog Posts
Inflation May be Inevitable... October 08, 2009 Among the factors for determining future allocation decisions is the most likely direction for inflation. We have noticed a number of investment firms launching new funds to profit from the inevitable return of high prices Inflation Paradox September 30, 2009 A little inflation is a good thing, because it shows that there is decent demand for products, and an economy that's nicely "humming along." Runaway inflation is not a good thing, however. ...Tandem Performance Puzzle September 25, 2009 Typically, stocks and bonds go in opposite directions, a tendency that has exhibited itself throughout most of 2009. But in the last four weeks, long-dated Treasuries have risen right alongside equities, as the pair has each notched a 6% gain....
The State of the Consumer September 22, 2009 There's some obvious trepidation out there among buyers, who would rather save than spend. But instead of money-market accounts (and their zero yields), it seems that most folks prefer to stash their savings in the stock and bond markets.
