You do not have to look too hard to find evidence that the U.S. economy is still in sorry shape. Unemployment just went over 10%, there are “for lease” signs everywhere you look, consumer sentiment indicators remain low and the housing market is still trying to find a bottom. I expect consumer spending here in the U.S. to be depressed for a long time. Despite the economic situation domestically, I still believe there will be good investment opportunities over the next several years for those who maintain a global perspective. The growth of the emerging market economies and specifically the growth of emerging world consumers may well play a pivotal role in keeping the global economy humming along.
The excessive spending by U.S. consumers the last ten years or so has left U.S. households under saved and over indebted. At the same time, however, our spending binge has helped create tremendous economic growth, job growth and income growth in the emerging markets. These newfound emerging world consumers may help pick up the slack going forward as U.S. consumers curtail their spending and repair their balance sheets by paying off debt and saving more.
The growth in the spending power of emerging world consumers has been quite dramatic over the last ten years. Ten years ago, the total value of emerging world consumption was about 50% of the total value of U.S. consumer spending. Today, the spending of emerging world consumers is equal to 91.7% of the spending by U.S. households.* Essentially, the world has almost reproduced or cloned the U.S. consumer.
Going forward, this new class of consumers will be a force. On average, these emerging market consumers are much younger, have low debt and high savings. They desire all the nice things we have (and take for granted I might add) and are willing to spend to get them. Cleary the U.S. consumer may not be up to the task of leading global growth, but all is not lost. We are no longer the sole engine pulling the global economic train. Emerging market consumers should be able to fill or at least reduce the gap created by our subpar spending and consumption. Invest globally with this in mind and rewards should
follow over time.
* Wells Capital Management, Economic and Market Perspectives, September 2009
Damien helps individuals invest and manage risk. He is a CERTIFIED FINANCIAL PLANNER™ professional and an Investment Adviser Representative of, and offers securities through, Financial Network Investment Corporation, Member SIPC.
These are the views of Damien Couture, CFP® and should not be construed as investment advice. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Additional risks are associated with international investing, such as currency fluctuations, political and economic stability and differences in accounting standards. Not all recommendations are suitable for investors. Each investor must consider their own goals, time horizon and risk tolerance.
Your comments are welcome. Damien can be reached at 925-280-1800 x101 or dcouture@jbcfg.com.
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