Analyzing the total valuation of the stock markets in Brazil, Russia, India and China, or BRIC markets, as compared to their combined gross domestic product,
BRIC markets are valued at $1.71 trillion, which is only 25% of their GDP, whereas stocks in industrialized nations account for 81% of GDP.
BRICS are still “in the early stages of the rally,” Jeffrey Kleintop, chief market strategist at
“You’re seeing a lot of run up [in the markets],” Kleintop admitted, “but it’s not gotten to the point where it is representative of the overall economy.”
John Praveen, chief investment strategist at
Alan Brown, head of investments at
Still, it should not be forgotten how volatile emerging markets can be, and how when one falls in value, it has a domino effect on other markets. When the Mexican peso lost its value in December 1994, it caused a 24% decline in developing nations’ stocks. When Thailand permitted its currency value to drop in July 1997, emerging markets lost 37% of their value within six months. And when Russia defaulted on $40 billion of debt in August 1998, emerging market shares lost 19% of their value.
In the past six years, the Morgan Stanley Capital International Emerging Markets Index has surged more than fivefold—but on five separate occasions has lost 10% or more of its value.
In the six years since
What happened in the U.S. in that time? The Standard & Poor’s 500 Index rose 32%, while developed nations’ stock markets, exclusive of the U.S., doubled.