As Emerging Markets Lead the Way to Recovery, Watch Related ETFs

In recessions past, it has been the American economy that has led the world back to growth. This time around it may be the emerging markets that lead the way. Related ETFs in overseas markets could be a way to play it.

China, India and Brazil were wounded in the latest market meltdown. However, these emerging powerhouses are ready to stage a comeback so strong they could lead the world out of a global recession, says the Organization for Economic Cooperation and Development. Bear in mind that they’re not going to solve the problem, but they can help. Nelson D. Schwartz for The New York Times reports that Europe, the United States and Japan were the old leaders, but are expected to lag this time.

This notion is also reinforcing the theory of decoupling-the idea that the emerging markets could be moving independently of the developed economies. Higher oil prices amid a deep global recession has also pointed to a side effect of decoupling.

The increased independence would signal a move of economic weight toward the emerging countries, rather than the the developed nations. Once dependent developing economies will move in step with their own fundamentals rather than in step with developed countries.

OECD’s report states China could grow 7.7% this year and 9.3% next year, faster than previous estimates. India could grow 5.9% this year and 7.2% next year, and Brazil’s economy, after slowing down, will reverse this year and expand 4% next year. The United States is set to shrink 2.8% this year and grow 0.9% in 2010.

• iShares MSCI Emerging Markets Index (EEM): up 29.8% year-to-date

Comments

[MarvinMBA:]

There seems to be a lot of different opinions on emerging market growth....and I'm not so sure they will be leading...still looking for USA Leadership to be a driving force. Its going to be awhile before we really get going here in the USA and the emerging markets will be following...extending yourself by investing in the emerging market could be negative for you at this time...we still have a long way to go and I believe we will still see a few downdrafts before this is all over...stick with short term money instruments for now is my sage advice in spite of what this author says...MarvinMBA

Jun 29 06:33 PM