EMs outperform Canadian markets

Though emerging markets might have underperformed U.S. equities in the long term, we find that the same is not true in Canada

Ruth Saldanha 1 May, 2019 | 2:00PM

As we discuss emerging markets and whether they make sense for Canadian investors, it is important to discuss dissenting voices. Morningstar’s John Rekenthaler argues that while emerging markets stocks could outperform over the next few years, their diversification benefits appear to be dwindling as the emerging countries become larger and ever-more entwined with the global economy. He also notes that emerging markets did not outperform U.S. equities.

But they did outperform Canadian equities.

When we look at the MSCI Emerging Market Growth Index in Canadian dollars, we see that the S&P/TSX Composite Index has significantly outperformed year-to-date, thanks to run up in Canadian equities so far in 2019. However, over a longer time-frame, the Emerging Market has outperformed the Canadian Index. Even in 2018, The S&P/TSX Composite Index lost close to 9%, while the Emerging Market Index lost a little over 6.5%.

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Ruth Saldanha

Ruth Saldanha  Ruth Saldanha is Senior Editor at Morningstar.ca