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 (
) -- Nearly every visitor to the
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
approximates 16% whereas the
SPDR S&P 500 Trust
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
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.
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