It sounded like a can’t-miss proposition: Buy the winners, drop the losers.
Developing countries from Brazil to China are expanding much faster than aging economies in the U.S. and Europe, where borrowing during the boom years has been a drag on growth. So the smart money bought stocks in emerging markets, expecting that rapid economic expansion there would provide better rewards. This year, that bet hasn’t worked out.
Consider the collection of emerging-market rising stars known as the BRICs, which stands for Brazil, Russia, India and China. All have economies whose growth exceeds the U.S.
— Brazil: The economy has expanded 3.1 percent over the past year. The benchmark Bovespa has lost 15.3 percent.
— Russia: Economic growth of 5.1 percent. The Micex has dropped 11.1 percent this year even after a 10 percent rebound in the past month.
— India: Economic growth of 7.7 percent. The BSE Sensex index is down 14.4 percent.
— China: Economic growth of 9.1 percent. The Shanghai Composite has slumped 10 percent this year.
By contrast, the U.S. economy has expanded a mere 1.6 percent over the past 12 months and the S&P; is down only 0.5% this year – a much better performance than the BRICs.
“If you were anywhere in the world other than in the S&P; 500 this year, you got crushed,” said Greg Peterson, director of research at Ballentine Partners, an investment advisory firm.
Apparently, there is no correlation at all…
Reference: Associated Press