Since the financial crisis the reasons for favoring EM have changed. In a world where most developed countries are struggling under the weight of excessive debt and lackluster economic growth, emerging economies stand out as a diamond in the rough, but strong economic fundamentals have not translated into outperformance for EM equities. https://www.seasoninvestments.com/insights/an-emerging-dichotomy/
The global financial crisis in 2008 was a game changer on many levels. One of which was, and continues to be, the gross reality that developed economies can no longer borrow their way to prosperity. According to many central banks, the answer to this problem is to export unemployment to other countries through competitive currency devaluation. https://www.seasoninvestments.com/insights/exporting-unemployment/
Our modern society believes that pain and sacrifice are unnecessary evils that can be alleviated by borrowing from our future prosperity. We can think of this as Wimpy economics since we would “gladly pay you Tuesday” for a hamburger today. https://www.seasoninvestments.com/insights/wimpy-economics/
The global slowdown and specific concerns over China’s economy have resulted in Chinese equities being one of the worst performing markets this year. This weakness largely reflects the market’s uncertainty surrounding the soft or hard landing debate. We believe the underperformance has left China’s market very attractive from a valuation standpoint. https://www.seasoninvestments.com/insights/shanghai-hanging-low/
QE3 will have no real impact on economic growth since it will not loosen any of the “binding constraints” preventing growth from accelerating. The pop in stocks and commodities following the Fed’s announcement has been referred to over and over again as the “sugar rally”, making it analogous to the surge of nervous energy one gets after indulging in too many sweets. https://www.seasoninvestments.com/insights/pour-some-sugar-on-me/
The improving fundamentals in emerging markets versus the deteriorating fundamentals in developed markets are primarily due to the different stages of the economic life cycle. Many emerging markets have made some tough, long-term decisions to bring their financial houses in order and are now reaping the benefits. https://www.seasoninvestments.com/insights/having-your-cake-and-eating-it-too/
It has long been debated to what extent the ECB will be willing (or even legally capable) of engaging in outright bond purchases of Eurozone countries’ sovereign debt. Such programs have already been implemented throughout this crisis, but such efforts have been limited and have fallen short of anything akin to the US Fed’s quantitative easing programs. https://www.seasoninvestments.com/insights/will-the-ecb-go-for-gold/
We have been in a policy-driven market now for roughly four years. Both monetary and fiscal authorities have played a heavy-handed role in the economy and capital markets over this time period. Global central bank (monetary) policy is on our Macro Radar due to its post-financial crisis impact on investor sentiment and the performance of both stocks and commodities. https://www.seasoninvestments.com/insights/macro-update-central-bank-policy/
Precious metals have been an excellent store of value and are considered to be on the more defensive end of the commodity risk spectrum. They tend to outperform the broader commodity complex when real interest rates are low, or negative as they are today, since the opportunity cost of holding a non-yielding asset is minimal. https://www.seasoninvestments.com/insights/micro-update-white-metals/
A disorderly unraveling of the crisis in Europe is still the greatest “known” threat to investors of all types. While a number of potential outcomes are possible, we do not believe a worst-cases scenario is the most likely. In our view, all European participants are in a slow creep towards the “Lose-Lose Win” scenario. https://www.seasoninvestments.com/insights/macro-update-europe-debt-crisis/
Walter Energy (ticker: WLT) is a pure play metallurgical coal producer with operations in the United States. The market for met coal has been very tight over the past several years due to constrained supply and increasing demand from emerging markets like China, India and Brazil. https://www.seasoninvestments.com/insights/micro-update-walter-energy/
As we head into the New Year there are four factors on our “Macro Radar” that we believe will be the primary drivers of financial market performance in 2012, which means we will spend a lot of time proactively focusing our research efforts on understanding and monitoring their development throughout the year. https://www.seasoninvestments.com/insights/macro-update-2012-macro-radar/
