With the Dow Jones Industrial Average soaring through the 20,000 milestone and headed higher, who would think now is the best time to pour money into the world’s five worst-performing stock markets in 2016.
The answer? Mitch Goldberg, president of investing firm ClientFirst Strategy.
Bargains await savvy investors who have the intestinal fortitude “to be willing to take a deep dive into poorly performing international stock markets at seemingly terrible times,” Goldberg recently explained in a blog on CNBC.com.
"This is a gutsy way to go international, but it's what I'll do. ... It's often best to go where others have left," he said.
“This strategy is deeply contrarian. This is for investors who have a high-risk tolerance or for those who allocate only a small portion of their portfolio to it.”
Here are a few important things to consider about the bottom five, starting with the worst, according to Goldberg:
- Mexico: "Potential trade war with United States, President-elect Trump's favorite country to threaten. The wall is another point of contention," he wrote.
- Italy: "Its banking sector is very weak; the government had to bail out the country's third-largest bank, and more bank bailouts may be necessary," Goldberg said.
- Turkey: "This is perhaps the most controversial pick. A failed coup, terrorism, war in Syria and with its Kurdish minority, cold relationship with its NATO partners, warmer relationship with Russia, a weak economy and a prime minister (Erdogan) who is less interested in a secular government," Goldberg wrote.
- Denmark: As with many other countries, it has a very high dependence on trade, and it's facing an aging demographic.
- Ireland: Ireland is in decent shape. However, investors are concerned that if U.S. companies no longer do inversions (relocate to Ireland to lower their corporate tax), that could hurt its economy. Also, Brexit looms large, as Great Britain is a major trading partner of Ireland.
“These five country stock markets have turned positive in the past month. Two have done well when viewed over a three-year time horizon. The worst, Mexico, remains mired in a big multi-year slump, but Mexico didn't even make the bottom five among the world's worst in 2014 or 2015,” he wrote.
To be sure, global-market investing should be an adventure for brave investors now that Donald Trump has officially taken the Oval Office.
Curtailing access to the world’s biggest market appears damaging, on the face of it, for the emerging markets relying on exports to catch up to developed nations, Bloomberg reported.
An alternative view: it could be just what the doctor ordered. Economic resilience comes from domestic demand. And U.S. President Donald Trump’s protectionist moves give developing countries strong incentives to take on the tough reforms needed to drive productivity, wage growth and consumption at home.
“For all emerging markets, and particularly China, it forces them to continue down the path of the structural reform -- which is a very big positive,” said Jordi Visser, head of investments at the $1.3 billion U.S. hedge fund Weiss Multi-Strategy Advisers in New York. "In China’s case there will be a continuous effort on the supply side reform side, the state-owned enterprises reform and the pension system reform.”
(Newsmax wire services contributed to this report).
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