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J.P. Morgan’s Executive Director Shares Her Secret for Investing in Emerging Markets

In 2016, the seed of future growth was planted and now is time to harvest the returns.
  • 2 min Read

By Patrick Watson

Inquisitive investors can read Patrick’s clarion insights in the Macro Growth and Income Alert newsletter, where he infuses each issue with a macroeconomic outlook that points to the strongest sectors and best-in-class stocks. His fundamental perspective on stock selection coupled with Robert Ross’s quantitative rigor helps subscribers earn a consistent annual income using stocks and secured options. Before joining Mauldin Economics, Patrick was the managing editor at All Star Fund Trader, an award-winning advisory service near the top of Hulbert Financial Digest ratings for eight years. For over a decade, he was a contributor to Weiss Research, and he served as an equity portfolio manager for high net worth investors. Add to that his experience as a stock analyst, securities and commodities representative, compliance officer, risk manager, and even as a military intelligence officer—and you’ll understand why Patrick’s second-to-none research intuitions make him a trusted member of John Mauldin’s inner circle. Check out Patrick’s latest market take with a model portfolio designed for consistent income. Subscribe to Mauldin Economics’ Macro Growth and Income Alert newsletter.
Inquisitive investors can read Patrick’s clarion insights in the Macro Growth and Income Alert newsletter, where he infuses each issue with a macroeconomic outlook that points to the strongest sectors and best-in-class stocks. His fundamental perspective on stock selection coupled with Robert Ross’s quantitative rigor helps subscribers earn a consistent annual income using stocks and secured options. Before joining Mauldin Economics, Patrick was the managing editor at All Star Fund Trader, an award-winning advisory service near the top of Hulbert Financial Digest ratings for eight years. For over a decade, he was a contributor to Weiss Research, and he served as an equity portfolio manager for high net worth investors. Add to that his experience as a stock analyst, securities and commodities representative, compliance officer, risk manager, and even as a military intelligence officer—and you’ll understand why Patrick’s second-to-none research intuitions make him a trusted member of John Mauldin’s inner circle. Check out Patrick’s latest market take with a model portfolio designed for consistent income. Subscribe to Mauldin Economics’ Macro Growth and Income Alert newsletter.

At the Strategic Investment Conference 2018, Gabriela Santos, Executive Director at J.P. Morgan Asset Management, compared the potential of the US and international markets in terms of equity returns.

J.P. Morgan projects 5.5% annualized for US equities over the next 10 years. Meanwhile, Japan is projected to return 6% and emerging markets (EM) around 8%. But that’s assuming today as a starting point.

Santos stressed that the entry point and currency can make a huge difference on returns, so they can vary a lot. The chart below that she shared during her speech illustrates the currency impact on international market returns.

Source: Mauldin Economics

For instance, a weak dollar may help US investors who hold foreign stocks. Likewise, the depreciation of another market’s currency could hurt US investors. But the aggregate effect can vary.

Emerging Markets Show Promise

Gabriela Santos then turned to emerging markets. She showed a chart of what she calls her EM “growth alpha,” the difference between the outlook for developed markets (DM) growth and EM growth.

When it’s shrinking, it’s a terrible time to invest in EMs. When it’s growing, it’s a good time to buy EMs.

Santos noted that we need stability in several areas such as currencies and commodities to reach the full EM outperformance.

Most people think of EMs as being markets and economies in Asia. And that is partially true. But there are regions beyond Asia that will outperform—in particular, Latin America.

Santos argued that Latin America today has the best starting point in terms of growth. She thinks that this year, the region will finally return to its earnings potential.

In 2016, the seed of future growth was planted and now is time to harvest the returns.

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