Concerns over slowing economic growth abroad have some investors re-considering their allocation to emerging market stocks. These warnings strike us as mildly amusing, as it was just a few short years ago investors couldn’t get enough emerging market exposure precisely because of their high rates of economic growth. What gives?
Including the current government closure, there have been 18 shutdowns since 1976. The debt ceiling has been raised virtually every year back to 1939, and in some instances multiple times per year. So, what’s the distinction between the two and how are they related? And, what do they tell us about future stock returns?
In our view, the primary role of bonds is to provide safety and capital preservation when they are needed most—during the inevitable periods of stock market distress. Despite legitimate and growing concern over our country’s financial condition, recent examples continue to illustrate the role U.S. Treasuries play as the ballast of a well-diversified portfolio.
Non-U.S. stocks currently account for more than half the global market. Despite this fact, investors still commit relatively small portions of their portfolios to investments abroad. In this essay we discuss the appeal to investing overseas and address the question of how much exposure is needed to reap the benefits of international diversification.
Q: Can you explain how TIPS work and, given widely-reported negative yields, should we be worried about their future performance?