The past fifteen years have seen profound changes in global economics. Traditionally, financial planners and the financial media have segregated the world into two categories: Developed Nations and Emerging Markets.
In the U.S., our overwhelming attention has been focused on our domestic market: when people refer to “the market,” they refer almost exclusively to the Dow Jones Industrial Average or the S&P 500 Index.
It is time to look at world markets more broadly and realistically. Today, the countries that we once called “Emerging Markets” have become quite developed economically, socially and politically. Conversely, many nations that we consider “Developed” such as the United States, Japan, and the Euro-Zone are struggling with enormous national debt, slow growth, high unemployment, and regulatory policies that may hinder economic development and, potentially, the returns that your savings can generate.
Let’s examine countries and regions that are more likely to enjoy economic growth: that is, those with favorable demographics, low national debt as a percentage of their GDP, a capitalistic regulatory environment, high infrastructure spending, and consumer products and services that support a burgeoning middle class. Countries that meet some, or all, of these criteria can be found in both Emerging Markets and Developed Nations.
The most often cited Emerging Market countries are Brazil, Russia, India, and China (BRIC). However, this list should also include much of Eastern Europe, Indonesia, Malaysia, Turkey, Egypt, Argentina, Peru, Chile, and South Africa. Some countries previously classified as Emerging Markets are now Developed Nations including Israel and The Four Tigers (Hong Kong, Singapore, South Korea, and Taiwan.) In addition, several highly developed nations continue to have favorable characteristics relative to future growth including Canada, Australia, and the four Nordic countries (Denmark, Sweden, Finland, and Norway.) That’s a long list of countries with investment opportunities. Unfortunately, most U.S. investors have not taken advantage of these markets because they see them as being too “scary.”
I am amazed that many people are riveted to discussions of the U.S. market without any consideration that the rest of the world is humming along quite nicely, and has largely moved beyond the financial debacle of 2008. Yet we continue to wring our hands over the floundering U.S. Equity Markets and the pathetic yields on Fixed U.S. Securities — all while laboring under the mistaken belief that “foreign markets are too risky.”
Trust me; if you lived in Asia or Latin America, and had experienced the disruption of your local equity markets by the U.S.-driven tech bubble of 2000 and the U.S. mortgage crisis of 2008, you would think that the scariest place in the world is Wall Street. It’s a matter of perspective.
Bill Sheehy is owner of Sheehy Associates Inc. which specializes in Retirement Planning for individuals and corporate 401(k) plans. He is a Certified Financial Planner, a Certified Employee Benefits Specialist, a Certified Fund Specialist and a Chartered Retirement Plan Specialist. He can be reached at bill.sheehy@lpl.com or by calling 609-586-9100.
Sheehy Associates. 3812-B Quakerbridge Road, Suite 208, Hamilton. 609-586-9100. bill.sheehy@lpl.com
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