Are Emerging Markets Set to Recover First?

Our team has put together a great table ranking 19 emerging market countries by how their stocks have performed in each of the past 10 years. Most of the E-7 countries—the most populous nations in the world—are listed, including Brazil, China, India, Indonesia, Mexico, and Russia, as well as other resource-rich and growing Asian, Eastern European and Latin American countries.


Many investors tend to focus on how one country performed over any given year, but a year of results is less relevant than what this chart highlights: the concept of mean reversion. This means that over a long period of time, even as returns fluctuate dramatically, performance eventually reverts back toward a mean or average.

Take Turkey for example, which underperformed the other 18 emerging countries in 2002. That year, stocks in Turkey declined nearly 25 percent. Yet, in six of the 10 years shown, Turkey was a top-half performer among emerging nations. Although Turkish companies decreased 20 percent in 2011, we believe that this year Turkey will revert to its long-term average.
We’ve already seen many of the countries, including Turkey, that were hit the hardest in 2011, bounce back in the early stages of 2012. Brazil, which declined 18 percent in 2011, has already made up some ground in the first two weeks of 2012, with an increase of 15 percent as of January 18. Hungarian stocks declined 20 percent in 2011, and have risen 9 percent so far in 2012.


Because emerging countries’ performance can vary due to their currency, inflation, liquidity or government policies, we believe professional active money managers are essential for globally minded investors.

Disclosure: Past performance does not guarantee future results.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.