Some Stock Markets Are No Longer Cheap
Are there cheap stocks now, at all? After a historic market crash in March, there was a huge jump in stock indices. As of May 8, the S&P 500 U.S. stock index is already 1.7 percent higher than a year ago. And the Nasdaq Composite Index went up about 15 percent in 12 months. As if there was no coronavirus crisis. (We also wrote about this here recently: Are You Sure You Will Buy Stocks in 2020? – Chart of the Day)
The coronavirus crisis is not taking its toll equally. Some sectors are performing very well. Let’s only mention companies that provide Internet entertainment (such as Netflix), online stores (Amazon), or pharmaceutical and medical equipment. Equities in other sectors are hit badly, such as airlines, tourism, energy companies, or European banks. But there are also big differences between countries.
Almost Half of the Money Was Lost
As the chart shows, since the beginning of the year, the stock markets in some countries are still in a loss of 30 to 50 percent. So high are the price losses of ETFs specialized in the stock market of a particular country. (ETF: Exchange Traded Fund or Exchange Traded Note.) No ETF was profitable in 2020. Chinese stocks are in a better position because Chinese authorities rolled back the coronavirus early. But each case is different. In the Swiss investment fund (EWL) some companies may cause stability. In big part, it’s the high weight of the pharmaceutical companies Roche and Novartis and the food industry group Nestlé.
Stock markets in countries dependent on the price of oil and other commodities are especially weak. The weight of tourism is also an important factor. And in some countries, foreign debt is a serious risk. Also, there are differences because of the devaluation of currencies. As we have recently shown on another chart, the currencies of some countries have depreciated sharply this year. (See here.)
Let’s Buy Cheap Emerging Market Stocks Now?
We don’t know if it’s worth buying this seemingly cheap stocks now. Do not take this article as an invitation or offer to buy shares. Nobody knows if we have seen the lows in this crisis. There may come more bad economic news or the epidemic situation may get worse. Experts always say we need to diversify our investments.
You should do your researches. And diversify your portfolio – don’t put all your eggs in the same basket. If you venture into emerging markets, invest in various countries with different risks. But also diversify over time. That means, split your capital into smaller packages and spend it gradually. (Read more about this here: How to Buy Cheap Stocks in the Coronavirus-crash?)
These ETFs are dollar-denominated securities of various U. S. asset managers. (Global X Funds, iShares, SPDR S&P, VanEck Vectors.) Traded in the New York Stock Exchange. The performance of these ETFs may differ from a country’s benchmark stock index for many reasons. The composition of the ETF may differ from the index. Changes in foreign exchange rates, costs, significant volatility, and changes in investors’ capital, inflows, outflows can affect. This is a selection. In larger or more important countries there are various local ETFs. With Brazil, for example, we found eight. (See the ticker codes of the ETFs in this article below.)
Ticker Codes of the Country ETFs
|United Arab Emirates