Bond management king Bill Gross favors investing in emerging markets over developed ones, thanks to superior economic performance in the former.
“Risk/growth-oriented assets, as well as currencies, should be directed toward Asian/developing countries less levered and less easily prone to bubbling,” Gross, chief investment officer at Pimco, wrote in his monthly investment outlook.
“When the price is right, go where the growth is, where the consumer sector is still in its infancy, where national debt levels are low, where reserves are high, and where trade surpluses promise to generate additional reserves for years to come.”
In other words, investors should seek economies that now focus on savings, but will gradually shift to consumption, Gross says.
“China, India, Brazil and more miniature-sized examples of each would be excellent examples.”
As developed economies such as the United States and Europe work to slash their humongous debt burden, they will lose their positions as drivers of the global economy, Gross says.
“Invest less risky, fixed income assets in many of these same (emerging market) countries if possible.”
If you need a developed market, try Canada, Gross says.
“Its conservative banks never did participate in the housing crisis, and it stayed closer to fiscal balance than any other country.”
When it comes to emerging markets, Mark Mobius, chairman of Templeton Asset Management, is probably the biggest bull.
In a recent interview with Bloomberg, he expressed particular enthusiasm for stocks in China and Brazil.
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