Will BRICs Outperform U.S. Markets In This Decade?

 |  Includes: EWZ, FXI, INDY, PIN, RSX
by: David Hunkar

Economist Jim O'Neill of Goldman Sachs coined the term "BRICs" in November 2001 to identify the core set of emerging markets at that time. These countries -- Brazil, Russia, India, and China -- did not have many things in common other than all being emerging countries. For example, in terms of political systems, Brazil and India follow democracy, China follows communism with a capitalist economic system, and Russia is not yet democratic, though it claims to be a democracy. Similarly, Brazil and Russia are rich in many natural resources, while China and India have limited natural resources and import most of the commodities needed for growth. Population-wise, China and India have two of the world's largest populations, while Brazil and Russia's population is relatively small.

Despite all the differences between these countries, the BRIC markets took off from 2001. From an article in the FT beyondbrics blog:

In investment terms, it paid off spectacularly. In the ten years since O’Neill launched the Brics in November 2001, the MSCI indices for the four Brics all comfortably outperformed the S&P 500. An investment of $100 in each of the four Brics,would have been worth $674 in Brazil, $451 in China, $459 in India and $414 in Russia. An investment in the S&P500 over the same years would have made just $112. See chart below.

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Source: Goodbye Mr Bric.

However, the BRICs have lagged the S&P 500 in recent years, as shown in the chart below:

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Source: Yahoo Finance.

Brazil's Bovespa index is in negative territory so far this year compared to the other BRIC benchmark indices and the S&P 500. It remains to be seen if the BRICs will outperform the S&P 500 this decade. Global investors will be eagerly watching the performance of the BRICs as their economies continue to expand, although at a slower pace than before.

Related ETFs:

iShares MSCI Brazil Index (NYSEARCA:EWZ)
Market Vectors Russia ETF (NYSEARCA:RSX)
iShares FTSE/Xinhua China 25 Index Fund (NYSEARCA:FXI)
PowerShares India (NYSEARCA:PIN)
iShares S&P India Nifty 50 (NASDAQ:INDY)

Disclosure: No Positions.