They comprise an extraordinarily fuzzy and vast category, including seven of the world’s 10 most populous countries: China, India, Russia, Indonesia, Pakistan, Brazil and Mexico, plus a host of other economically and geopolitically crucial places, like South Africa, Taiwan, Turkey and Poland.
Numerous studies, including those by Vanguard and Morgan Stanley, show that over extended periods, the stock returns of emerging markets and developed countries like the United States don’t move in lock step most of the time.
Generalizing about so vast a swath of the planet is hazardous, but for the most part, the Omicron variant, soaring inflation, tightening monetary policy, political strife and climate change threaten these countries more urgently than rich ones.
One problem is that Western central banks have begun moving toward a more restrictive monetary policy.
A day earlier, the Federal Reserve announced that it was effectively moving faster toward interest rate increases in the United States, which now seem likely to start in the first half of 2022.
In a series of research reports, he has warned of the vulnerabilities of a group of countries that he calls “the troubled 10.” They are Brazil, Colombia, Chile, Peru, Hungary, Romania, Turkey, South Africa, Indonesia and the Philippines.
While other analysts may be less explicit, many urge caution.
This year, the Turkish lira has lost half of its value against the dollar, consigning Americans invested in Turkish stocks to a decline of more than 25 percent.
Nearly all emerging markets are being lumped together with other assets on the risky end of the investing spectrum: “meme stocks” like GameStop and AMC Entertainment, cryptocurrencies and highly priced tech stocks.
It’s as if stocks, bonds, commodities and foreign exchange markets are responding to the baton of a mercurial but authoritarian maestro, who changes direction often but insists that all orchestra members play together as one.
But you may already participate in emerging markets indirectly, possibly even without realizing it.
This benchmark allocation isn’t large when you consider that emerging countries account for roughly 39 percent of the world economy, measured by gross domestic product, and for about a quarter of the value of world stock markets.
Inducing public companies to behave properly is difficult enough in the United States, with all its laws and regulations.
funds — those that aim to exclude investments in companies whose environmental, social and governance behavior do not meet fund standards — seems a sensible option.
Among them are the iShares ESG Aware MSCI EM ETF, the SPDR MSCI Emerging Markets Fossil Fuel Reserves Free ETF and the Vanguard ESG International Stock ETF, which includes developed and emerging markets.