2013 tough year for emerging markets

If only the world economy and portfolio returns were based solely on Canadian financials and the S&P 500 this year. Unfortunately, the global economy is not cooperating with QE magic, neither are emerging markets or real economy sectors like materials, metals and mining. See: Hit like a ton of bricks: 2013 tough year for emerging markets

“In November, the Organisation for Economic Cooperation and Development, the rich world’s number-crunching club, lowered its global growth forecast for 2014 by nearly half a point, to 2.7 percent, because of the slowdown in emerging-market economies (EMEs).

The fate of the whole world economy is now tied to that of the emerging markets, it said.

“Contrary to the situation in the early phases of the recovery when stimulus in EMEs had positive spillovers on growth in advanced economies, the global environment may now act as an amplifier and a transmission mechanism for negative shocks from EMEs,” it said.”…

“Chinese investment growth fuelled commodity demand and supported many economies as far away as Brazil and Australia,” said the bank, warning: “There is no ‘China after China’.

“In other words, there will be no superpower growing in double-digit GDP terms now that China is slowing.”

Will there be growth in the world in 2014? Absolutely. The investment risk though is that it won’t be nearly as robust as the sell-side crowd is projecting:

“The U.S. market at roughly 1,800 on the S&P is trading at 19 times earnings. I am always sort of befuddled because people use a much lower figure on that…we went back and triple-checked trailing 12-month S&P 500 earnings and they are only $95. A lot of companies report earnings before the bad stuff and we’re talking about GAAP earnings — actually talking about real accounting earnings — they are only $95. So for you to believe that the market is only at 14 times, 15 times next year’s number, you have to make some pretty robust assumptions on earnings growth to get $95 to that $120 or $125 figure”
–Jim Chanos, Nov 25, 2013 at Reuters conference

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