Investing Half Your Assets in Emerging Markets

Jeremy Grantham, a founder of GMO, says that he’s so optimistic about the returns of emerging markets in coming years that he’s telling his kids to put more than half their retirement assets in emerging market stocks. Grantham’s made it clear over the last year or so that the best opportunities in global markets are emerging market equities.

Grantham points to a growth differential and valuation gap that favor developing nations over advanced economies. His $74 billion investment firm’s forecasting model suggests that they’ll lead returns during the next seven years. Emerging economies will grow by at least 5 percent per year through 2019, more than double the pace of developed nations, according to Bloomberg composite forecasts. GMO also points to fewer “fragile” nations, attractive currency valuations and declining inflation rates.

A wholesale change of the political guard is helping. In December 2015, Argentina elected as president Mauricio Macri, a former banker and chairman of the soccer club Boca Juniors, who dug the nation out of a messy 15-year debt crisis. That was the start of a string of victories by market-friendly candidates across Latin America: Ex-Wall Street banker Pedro Pablo Kuczynski won the Peruvian presidency the following June and Michel Temer took control of Brazil that August after Dilma Rousseff’s impeachment.