In China, 2012 is the Year of the Dragon. In the United States, voters might hope it turns out to be the Year of the Third-Party Candidate. But if you’re looking for the best way to make money, I believe 2012 will be the Year of the Emerging Market Investor.
In today’s video, I’m sharing with you my top 10 predictions for emerging markets in the New Year. My forecast includes falling interest rates in Latin America, and the growing influence of China. But to get the full story, you have to watch the video!
P.S. The action in the broader markets may send ripple effects around the world, in the near term. Longer term, plenty of emerging-market companies keep expanding, innovating and, best of all, paying their shareholders handsomely. Get in on the next Emerging Market Winners of 2012 and beyond — sign up today!
Hi, this is Rudy Martin for Uncommon Wisdom Daily.
As 2011 comes to a close, the U.S. economy is facing serious challenges. We have a $1.5 trillion deficit, and $15 trillion in debt, not to mention $200 trillion in unfunded liabilities. Fifty million Americans are on food stamps and 18 million children are living in poverty.
Unemployment, including the underemployed and those who have given up looking for jobs, stands at 25%. And half of all U.S. states are bankrupt, including California and Illinois.
As bad as things are, they’re even worse in Europe. That’s why I’m such a fierce advocate for investing in emerging markets. In fact, I think 2012 will be the year of the emerging market investor.
Today, I want to give you ten predictions involving emerging markets in the New Year, so you can make more informed decisions about where to invest your money.
Prediction #1: Commodities and emerging market currencies will outperform the U.S. dollar, the euro and even the yen.
Prediction #2: Those stronger emerging market currencies will help small-cap stocks outperform larger companies. This will be especially true in Brazil, where small-cap funds will beat their larger peers by a huge margin.
Speaking of Brazil, I predict that it will privatize its natural resource sector. The government will decide to use its surplus to take a more active role in key companies such as Petrobras, Vale and Braskem.
However, I also believe that because of the global economic slowdown, exports from many of these big Latin American companies will slow. That, in turn, will reduce inflation pressure, and central bankers will respond by cutting interest rates to near zero.
Given these lower borrowing costs, emerging market companies will leverage themselves further and buy back more of their own shares, rather than investing in new projects.
In addition, strong balance sheets and free cash flow will lead to significant increases in dividends, M&A activity and business reinvestment.
Turning to Asia, I predict that Hong Kong will rank as the most developed financial market in the world, overtaking the United States and the United Kingdom.
Meanwhile, China as a whole will become less acquisitive, reducing overall global foreign direct investment.
China will also respond to the weaker dollar and euro by doing more to make its own currency more convertible, in order to maintain its reserves and investments.
And finally, I predict that more countries will begin to favor China as a primary trade partner, over the U.S. and Europe. China’s swelling bank account and currency will allow it to dictate terms for acquisitions more carefully, and bring younger, more energetic emerging economies such as India, Indonesia and Turkey under its influence.
I’m Rudy Martin for Uncommon Wisdom Daily. Have a very happy New Year.