China Rising

Markets around the world have seen some type of rally over the past few months. There is money to be made in these rallies but the question is: Where should I invest to make the most? Many people enjoy investing here in the US largely because they are familiar with our companies and their business models. But is this really the best place to invest to recoup piles of losses we incurred over the past year?

The answer is no. Emerging markets have rallied more than the US. Specifically, China is leading the way. Don't get me wrong. The US has seen a tremendous rally that is likely to continue for a while as the economy improves and companies revert back to their profit making ways. If you want to outperform anyone and everyone, you have to incorporate China into your portfolio. Many mutual funds that are solely focused on China have returned 40% YTD returns. Emerging market mutual funds and ETFs have returned a double digit monthly averages for the past few months (percentages are compliments of the mutual fund section in Money Magazine). This shows emerging markets are not only outperforming but are the highest in timeliness.

So, why China? Consider the stimulus plans that are considered the driver to a economic rebound. The US has spent trillions to stimulate the economy. The amount of money spent is only equal to about 5% of our GDP. China has not spent near as much to stimulate their economy; however, the spending they did do is equal to about 13% of their GDP. Because the US GDP is so much larger than everyone else in the world, we have to spend a whole lot more to get the same stimulation impact as China. Since China has spent more than double the amount we have, as a percentage of GDP, we can expect a faster and more timely recovery in China, not to mention the other emerging markets. This is why smaller economies will rebound faster than the US. Their is money to be made in the US, but cash money to be made in emerging markets, specifically China. Do your research and take advantage of all the world has to offer.