This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Emerging-Market ETFs Bound for Recovery?

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (ETF Expert) -- Nearly every visitor to the CNBC microphone is making the same proclamation -- that is, that emerging markets can't handle commodity price inflation as well as developed markets.

The problem with this analysis is the conclusion it assumes -- that stock assets from the U.S, Japan and the eurozone will outperform the industrializing world.

Sure, this has been true for the previous six months, no doubt about it. The six-month rolling returns for Vanguard Emerging Markets (VWO) approximates 16% whereas the SPDR S&P 500 Trust (SPY) registers 26%. Note: 1,000 basis points is nothing to sneeze at!

However, stock markets are forward-looking creatures. In fact, creditor nations in the industrializing world are closing in on their battle to beat inflation, whereas the developed world's stimulus is still "reflating." It follows that emerging-markets stocks should rebound long before analysts see it coming, while shares of companies in debt-riddled, deficit-spending countries may take an unwelcoming hit.

Consider the following: VWO closed at its lowest ebb for 2011 on each of the two trading days that followed the Libya uprising; it's down a mere 0.7% since the Friday before the Libya rebellion (Friday, Feb. 18). On the other hand, SPY has shed 2.5% since that day.

Could a pullback of 7.4% in VWO -- one that began on Jan. 12 and may have culminated on Feb. 23 -- represent an end to the near-term disenchantment? Similarly, are gurus betting a bit too heavily on the resilience of developed-world large-caps in SPY?

It's too early to tell.

Nevertheless, it's not too early to contemplate a contrarian viewpoint. Perhaps emerging market stock assets will be the better choice over the next six months.

Here's some food for investor thought: Citizens of emerging regions spend a larger percentage of their disposable income on food and energy than the citizens of industrialized regions do. Yet, the monstrous spikes in the prices of food and energy over the last week haven't had the stock market impact that many had anticipated.

Once again, it's way too early to suggest that emergers are on the mend. Likewise, if oil prices settle into a trading range, expect U.S. stocks to seek out multiyear highs, rather than "correct."

With that said, you could trim your emerging-market holdings. Just don't abandon them. One look at India's potential upswing (e.g., higher lows, encouraging economic data, etc.) should give you the confidence to pack a contrarian's lunch.

You can listen to the ETF Expert Radio Show "LIVE", via podcast or on your iPod. You can review more ETF Expert features here.

Disclosure Statement: ETF Expert is a website that makes the world of ETFs easier to understand. Gary Gordon, Pacific Park Financial and/or its clients may hold positions in ETFs, mutual funds and investment assets mentioned. The commentary does not constitute individualized investment advice. The opinions offered are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial or its subsidiaries for advertising at the ETF Expert website. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert at the site.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,083.80 -2.83 -0.02%
S&P 500 1,987.98 +0.97 0.05%
NASDAQ 4,472.1080 -1.5890 -0.04%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs