Emerging-markets investors urged not to bank on pigs
One of the ABCs of investing in emerging markets has been BRIC. The acronym, coined by Goldman Sachs economists in 2001, stands for Brazil, Russia, India and China, and the four countries have been at the center of some big gains since. Now, though, a new acronym is gaining traction, but for less auspicious reasons.
Meet the PIGS: Portugal, Iceland, Greece and Spain. These European economies have been struggling amid rising inflation, and Spain has been suffering from a sharply weaker real estate market. Citi Investment Research analyst Ronit Ghosel, though, takes exception to Greece’s inclusion, saying Hellenic debt relative to gross domestic product is significantly lower than the other countries’.
A baby bear?
U.S. stocks are officially in a bear market, after the Standard & Poor’s 500 on July 9 closed more than 20 percent below its prior high. But a JPMorgan strategist suggests this may just be a baby bear.
Thomas Lee says bear markets typically come in two varieties: “Cub” markets, on average, find their bottom within 19 days, while full-blown bear markets fall for an average of 325 days more after crossing the 20 percent threshold. Lee, who has been one of the more optimistic strategists on Wall Street, thinks the market may have found its bottom on July 15. He points to easing oil prices, a rebound in financial stocks and the recently approved government plan to help 400,000 families avoid losing their homes to foreclosure.
Perspective on oil profit.
Exxon Mobil on Thursday reported the biggest-ever profit from operations for any U.S. company, at nearly $12 billion. Its earnings over the past 12 months, $43.64 billion, are also a record, according to Standard & Poor’s senior index analyst Howard Silverblatt.
To put this in perspective, it’s more than the $42.46 billion produced by the economy of Qatar in 2007, according to the World Bank. The Arab nation ranked No. 68 in the world that year for gross domestic product, and it too derived much of it from petroleum. Exxon Mobil’s mammoth profit nevertheless disappointed investors, who had been anticipating even bigger numbers. They, as well as weaker crude prices, knocked down the company’s shares by 4.7 percent the day Exxon Mobil reported its earnings.
Investors optimistic.
Most U.S. investors — 62 percent — believe the economy is in a recession, according to a survey by asset manager Schroders. But they are still optimistic about their own portfolios, as 94 percent expect to see a positive return over the next 12 months. But they aren’t looking for big gains. Nearly half of the respondents predict gains of 5 percent or less. The survey polled 507 adults between May 27 and May 28 who have at least $100,000 in investable assets. The margin of sampling error was plus or minus 4.4 percentage points.
