Lately, there have been some serious concerns of a stock market correction in the U.S. Thanks to relatively high valuations and relatively disappointing economic data, domestic stocks seem expensive and might not hold a lot of short-term upside.
Developed equity elsewhere in the world doesn’t look much better, of course. Concerns of the solvency of a major Portuguese bank rattled stocks in the region, and rekindled memories of the 2011 European debt crisis.
So where should an investor go in this kind of environment?
Well, there’s no guarantee that U.S. will suffer a correction anytime soon — after all, it’s been a raging bull market since 2009, and we’ve seen plenty of other troubling data points along the way. So you can always stick it out in blue-chip stocks.
Then there’s the old go-to of cash if you’re worried, which will keep you whole but leaves you sitting out of any investments that move higher.
A better option, in my mind, is to go global. Because if things look rocky at home at a top … why not buy regions where things may look rocky, but the negativity has already been baked in?
That’s the case for China and India ETF investments right now.
China ETF Investing
China stocks have picked up nicely since their May lows, with major China ETFs including the iShares FTSE China 25 Index Fund (FXI), the iShares MSCI China Index Fund (MCHI) and the SPDR S&P China ETF (GXC) tacking on about 8% each to double the S&P 500’s return in the same period.
It’s all adding up to good momentum and appealing technicals. Longtime commodity trader Peter Brandt just shared a chart-heavy analysis of Asian equities, making the case for why “Asian equity markets are on the verge of explosive advances.”
Sure, there are still concerns about a credit bubble in China and the relative slowdown from brisk double-digit GDP growth just a few years ago to a current growth rate of about 7.4%. However, China remains one of the cheapest regions in the world — and regardless of the pains it will surely suffer as the regions transitions from a manufacturing economy to a service one, the sheer size of the region and upside potential from an emerging middle class cannot be thrown out the window.
India ETF Investing
India’s story of growth challenges is similar to but still much different than China’s. India GDP peaked at 10.3% in 2010, according to the World Bank, but dropped sharply to just 6.6% growth in 2011, 4.7% growth in 2012 and 5% growth in 2013.
This tapering off of economic expansion has worried investors. Despite the nation being very populous, India is struggling mightily to turn those many residents into middle-class consumers or skilled workers.
The reasons are numerous, including a recent bout of red-hot inflation that has cut into consumer spending power. However the spring elections in India ushered in a trade-friendly leadership that could boost the economy big-time.
Like Chinese funds, India ETFs have enjoyed a nice tailwind since May. Check out these returns:
- WisdomTree India Earnings Fund (EPI), up 16%
- iShares MSCI India ETF (INDA), up 12%
- iShares S&P India Nifty 50 Index Fund (INDY), up 12%
- PowerShares India Portfolio (PIN), up 13%
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.