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Emerging Markets are on Fire, but that’s not always a good thing!

November 5, 2010

Investors have poured a net $43.9 billion into Emerging Markets funds this year through Oct 27, 2010 according to Lipper. Emerging markets are stock exhanges in countries that aren’t large enough to be called developed markets; examples: Brazil, India, China and Russia. The average mutual fund soared 15.3% this year thru October vs 7.9% for the Standard & Poor’s 500, including reinvested dividends. Some individual markets have posted enormous gains this year, says MSCI (which tracks global markets): for example Columbia up 57.9%, Thailand up 45.2% and Turkey up 35.6%. The rush to emerging markets isn’t limited to the U.S. Investors world-wide have poured $71.2 billion into emerging marketsd stock funds. The passion for emerging markets isn’t limited to stocks as bond funds have been steaming too, jumping 15.2% the same period. In contrast the u.S. government bond fund is up 8.5%.stock graph

But is this a good thing? The appetite for emerging markets has been driven by low interest rates in the deveolped world, especially the U.S. That craving has redoubled in anticipation of the Federal Reserve pushing rates down further to stave off deflation. In the meantime, some emerging nations have been raising interest rates. India’s central bank, for example, raised interest rates again for the sixth time this year. What goes up must come down? At GAI ( we want to help you with all of your financial needs. Give us a call today at 212-979-6830 or stop by for a visit. There is no better time to look at your financial portfolio than now. See you soon!


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