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Why Faber Thinks Emerging Markets Will Outperform US Markets

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Marc Faber on emerging markets

Marc Faber discussed his views on emerging markets (EEM) (VWO) in a recent interview. He believes emerging markets (EDC) will outperform US (SPY) (QQQ) markets going forward.

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Performance of emerging markets versus S&P 500 Index

The iShares MSCI Emerging Markets (EEM) ETF, which tracks the performance of the emerging markets, has risen nearly 17.7% on a year-to-date basis as of June 6, 2017. The SPDR S&P 500 ETF (SPY), which tracks the performance of the S&P 500 Index, rose nearly 8.7% during the same period. The improvement in the demand outlook and demographics changes in emerging economies like India (INDA), Brazil (EWZ), and China (FXI) could be important market drivers.

Faber also said that emerging markets like India and China aren’t very correlated to the movement of the S&P 500 Index. They are more correlated to domestic factors like policy reforms, new regulation, and change in interest rates. However, he also said that investment in emerging markets can be risky. For example, Brazil’s IBOV Index fell nearly 8.6% on May 18, 2017. However, if investors are selective about their investments, then this risk could be minimized.

Performance of various emerging indexes

On a year-to-date basis, India’s Nifty 50 Index returned nearly 18% as of June 6, 2017. Brazil’s IBOV Index returned nearly 5.6%, and China’s Shanghai Composite Index returned nearly 1.2% during the same period.

In the next part of this series, we’ll analyze Marc Faber’s view on the US technology sector.

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