It’s true that crowdfunding is mainly designed for financing startups and small companies; that is the regulatory definition. However, the term is being borrowed for "friends and family" contributions to a child's 529 account, which crowdfunding services are facilitating.
Jason Hsu, the chief investment officer at Research Affiliates, said that EAFE and emerging market equities will provide greater downside protection to global growth shocks than U.S. equities. Growth in earnings per share is one of the most significant engines for long-term equity returns. In the U.S., earnings per share growth has surpassed the historical trend rate in the post-crisis period. EPS growth is cyclical; that is, the growth rate tends to be above trend during the expansionary phase of a business cycle and below trend in the contraction phase. Both research analysts and investors alike are prone to over-extrapolate the recent growth rate into the future and pay high prices (high price to earnings ratio) after a period of strong EPS growth.
EAFE (global ex-U.S.) and emerging marketd real EPS growth rates have already declined. The reversal signals a slowdown in growth after the strong recovery post the global financial crisis. The decline in EPS growth has been substantial: both EAFE and EM EPS growth have both breached below their long-term averages. Given investors’ tendency to over-extrapolate from recent growth, it is likely that EAFE and EM equity prices reflect significantly more pessimism and risk awareness than do U.S. equity prices.
Hsu also predicted:
With their positive real yields and strengthening currencies, EM local currency sovereign bonds are likely to outperform their developed market counterparts. These bonds also stand to benefit from the potential for policy rate cuts and credit rating upgrades.
The most significant risk for sovereign bond investors is interest rate risk. Developing market central banks have primarily been concerned with lackluster growth and sustained unemployment against the backdrop of high debt levels, while EM central banks have focused more on the inflation risk associated with years of rapid GDP growth.
Indeed, the desire to stimulate growth, combined with the incentive to erode government indebtedness through inflation, has resulted in negative real interest rates for the developed economies. A policy that prolongs negative real interest rates serves to subsidize borrowers, among whom developed governments are the largest, at the expense of savers. In contrast, central bankers in emerging economies are leery of the destabilizing consequences of high inflation; accordingly, they have mostly erred on the side of higher policy rates.
