Charles Sizemore of HS Dent questions whether Emerging Markets are Decoupling.
According to the theory, the emerging market consumer is now ready to take the torch from his American cousin.   We find this thought to be as absurd today as it was when we first heard the phrase in late 2006. Yes, the emerging market consumer is coming of age.
This will not happen overnight. It will not happen this year. It will be a gradual process that happens over the course of several years.Â
So, while we agree with the “decoupling†theory over the long-term, we fear that investors will be sorely disappointed in the present. Â
For investors moving money into ex-US equities markets to protect wealth we’d suggest giving the decoupling theory a second look. The Hang Seng, Nikkei, ASX200 will get obliterated, along with the DOW JONES and S&P 500 when US markets finally collapse. It has taken decades to create the “coupled” globalized economies we have today — decoupling cannot happen in 18 months. We saw this from August to November of 2008, and we will see it again.
Peter Schiff, of Euro Pacific Capital, may disagree, but the fact is when the USA sneezes, the rest of the world catches the swine flu a cold.Â
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