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Like It Or Not, You Too Have Exposure To Emerging Markets

BySober Look
Published 06/20/2013, 03:44 AM
Updated 07/09/2023, 06:31 AM
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We received the following question via e-mail (paraphrased):

"I am a U.S.based retail investor. I have no positions in emerging markets - why should I care about places like Brazil [discussed here] or China [discussed here]?" Here are two reasons (among others) that should get you interested in the events taking place in emerging markets - particularly the BRIC nations:

1. BRIC nations have been buying massive amounts of U.S. treasuries. As their growth slows down and current account surplus declines, so will their purchases of U.S. treasuries. On Wednesday, the other large buyer of U.S. treasuries announced that their buying days may be over some time next year. What do you think happens to U.S. interest rates? Mortgage rates? Dividend stock valuations?
Net Purchases
2. Take a look at the U.S. exports to BRIC nations over time as percentage to total exports. These nations' economic growth will have a direct and very real effect on U.S. corporations (enjoy your CAT or BA shares while you can), jobs in the U.S. and the U.S. economy as a whole.
Exports
As an American investor, when you see the Indian rupee sell-off to record lows as panicked investors move dollars out of the country (chart below), you should be concerned. Whether you like it or not, you have exposure to emerging markets.
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