August 6, 2013
Second Quarter 2013: Chart of The Quarter
Emerging Market equities are the most attractive asset class in our valuation work. This chart illustrates that the normalized earnings for Emerging Market stocks (blue line, right hand scale) has continued to increase despite the flat price return since early 2010. As a result, the normalized earnings yield now exceeds 9% in real terms compared with 4% at the peak of the last cycle in 2007. Back then, investors were enthralled by the long-term secular growth outlook for emerging economies. Today, the same investors are full of apprehension and doubt. They point to inflation, political turmoil, and weak Developed Markets demand for exports. We, too, are cognizant of the near-term headwinds. However, we believe the valuation provides a significant margin of safety.
On a quarterly basis, Hirtle Callaghan publishes our perspective on the current market. We have included the first page of that piece here. If you would like to receive the full perspective, please contact us.