Re-Emerging Emerging Markets

Perma-bears lauded the seeming implosion of Emerging Markets stocks when the market correction began in the spring. It's our pleasure to ruin their perverse brand of fun.

Emerging Markets have been resilient in the face of a spate of recent bad news—a bullish signal for the global economy and stock markets. In fact, the MSCI Emerging Markets index is up over 16% since mid-June.

Consider: in recent months we've seen a coup in Thailand, a budget fiasco in Hungary, the assassination of a senior central bank official in Russia, fraud allegations and a contested election of President Lula in Brazil, continual political turmoil over the outcome of elections in Mexico, talk of nuclear armament in Iran and North Korea, protectionist talk of tariffs against China…and still Emerging Markets are resilient.

EM stocks have had a great run over the last several years, but the party's not over just yet. Strong economic headwinds are bolstering developing regions, and the fundamentals are still largely underappreciated.

Developing nations have increased the stability of their financial and regulatory infrastructure. Free trade, high demand for manufactured goods and commodities, and influxes of capital for investment from outside developed nations is keeping economic activity brisk.

The rise of the consumer in developing countries is also an underappreciated factor. Many nations in Asia and Latin America are seeing surges in per capita GDP—allowing higher standards of living and increased demand for goods. Some countries, like South Korea, have higher adoption rates of technologies such as cell phones and broadband internet than other larger economies like the United States.

Emerging Markets are at the tip of the spear for economic growth—that's a great place to find big stock gains in prosperous times.