In an 1897 editorial, the New York Sunfamously reassured eight-year-old Virginia O’Hanlon, telling her: “Yes, Virginia, there is a Santa Claus. He exists as certainly as love and generosity and devotion exist.”
Although this story may smack of the triumph of hope over experience, there’s always been wisdom in the idea of Saint Nick. To the extent he represents generosity and devotion—well, who wouldn’t want to believe in that?
While investing is much better left to experience, not hope, once in awhile there’s a gift so compelling you have to believe: if not in Father Christmas, then in the data itself. As the new year dawns, that gift is the emerging markets.
EEM
—despite the fact that emerging markets have higher growth rates. Other relative valuation measures cast these markets in a similarly good light. They trade at a slim 69% premium to book value (vs. 255% for the S&P 500). Emerging markets have never been more forsaken. With the luster of globalization dimmed by the pandemic and nationalism, owning shares in developing economies has appeared less attractive to many Americans. But that concern is already more than priced in. There’s also a burgeoning macro tailwind that favors foreign shares: a weakening dollar makes assets denominated in diversified baskets of currencies more attractive.
Meanwhile, the globe is awash in overvalued assets. A zero interest rate policy has propped up real estate while the Trump tax cuts have temporarily boosted prices of U.S. growth stocks. The extrapolation of an endless pandemic has prolonged and extended the tech bubble. Bonds have never been more expensive, offering pitiful yields in return for high interest-rate risk. Even ridiculously frothy cryptocurrencies and gold have ridden the wave of easy monetary policy. No gifts there.
Whenever any type of investment has underperformed as much as the emerging markets have, investors tend to give up hope—precisely when their performance is about to reverse. In fact, it’s the capitulation of disappointed investors that sows the seeds of the new rally. No one can time the markets, but several years of underperformance leave emerging market stocks with the most compelling valuation of any asset class out there.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
