Can Global Investors Profit From GDP Watching?
Conventional wisdom holds that investors must look to emerging markets for healthy returns over the coming decades. BRIC markets, including Brazil, Russia, India, and China, are frequently mentioned as holding the most potential given projections for rapid and steady economic growth. However, GDP growth is not necessarily a solid indicator of stock market gains to come. We’ll discuss the relationship between the two and look at other useful metrics to consider when hunting for overseas investment opportunities. (For a background on this topic, see our Economic Indicators Tutorial.) Contrarian Studies An analysis by Goldman Sachs concluded that there was no correlation between real GDP growth in emerging markets and their stock market returns from 1976 to 2005. A 2005 study by the Brandes Institute, the research arm of famed value investor Brandes Investment Partners, actually showed that the countries with the highest GDP growth – including emerging markets – posted the worst stock mar
