Wall Street says U.S. stocks are “too expensive.” So buying “cheap” emerging markets is the way to invest now, right? Not so fast, according to Hedgeye Demography sector head Neil Howe.
One prime example of a “tempting” and “cheap” emerging market to invest in, according to Howe, is Brazil. A closer look raises a number of red flags… like Brazil’s greying population set to retire on an “absurdly generous retirement system,” Howe says.
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“Between a third and a half of Brazil’s public budgets are spent simply on retirement benefits,” Howe says in the clip above. “This is bad news that is coming soon. In emerging markets, the demographic outlook combined with the political institutions they inherit is really important to consider here.” |
And it’s not just in Brazil, where the stock market is largely flat for the year-to-date. Several emerging equity markets are already down big in 2018, like Indonesia (-11%) and Turkey (-20%). So remember: just because something is cheaper, doesn’t mean it’s a better investment.
Watch the full clip above for more.
