In fact, those investors would have been better off staying closer to home.
By the end of 2013, UK stocks had delivered a total return of 44 per cent, compared with a 21 per cent rise in emerging markets. Today, the overall stockmarket in the UK and the US looks close to, or just above, fair value. Conversely, emerging market stocks are trading at a discount, with price-to-book ratios now around 12 per cent below the average.
At major road junctions in Brazil, the way to “Reverso” is clearly marked. When I first visited Brazil, I thought Reverso must be a very important place. Then I realised it means going back the way you came. For any emerging market economy, this is always a possibility. You don’t invest money there because you think there’s no risk: you invest because you like the odds – and right now they look fairly good.
Kerry Craig is global market strategist for JPMorgan Asset Management