Fisher Investments Editorial Staff
Emerging Markets, Developed Markets, GDP

A Race We All Win

By, 01/19/2010
  Story Highlights:

 

  • The developing world makes up a quarter of world GDP today—slightly more than even the US share.
  • Projected 2010 GDP growth for emerging markets clocks in at 5.9% to the developed world's 1.9%.
  • With a century's worth of innovation at their fingertips and the majority of the world's population, quick growth won't likely fade anytime soon.

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We think of rich, developed world countries as a pretty powerful bunch economically. No doubt they are—but the competition is heating up. And the more investors can wrap their heads around the whole globe, the better.

 

The developing world makes up a quarter of world GDP today—slightly more than even the US share. Put another way, emerging markets as a whole are as powerful as the US on the global scene. On a country-by-country basis, China (7.1% of global GDP) is bigger than Germany (6.0%) and rivals Japan (8.1%). Brazil (2.6%) and India (2.0%) are fast catching up with France (4.7%) and the UK (4.4%). Projected 2010 GDP growth for emerging markets clocks in at 5.9% to the developed world's 1.9%.*

 

Sound fast? It's par for the course in the developing world—there's a lot of catching up to do. Those of us lucky enough to live in a developed nation have electricity, tartar-fighting toothpaste, a car (or two), a TV (or three), a dishwasher, a washer/dryer. Most Americans have had these products so long, we wouldn't know what to do without them. Not so elsewhere around the globe. The majority of folks in emerging markets have few, if any, of these life-improving innovations—and are understandably eager to get them.

 

Emerging markets today are analogous to developed nations early last century. But there are a couple important differences. For one, the pace of developed world consumption was limited by the pace of innovation. Electricity, dishwashers, radios, pharmaceuticals, TVs, and computers were phased in over 75 years and more. All that innovation and technology is at developed markets' fingertips right this second. They're free to travel an accelerated (sometimes spectacular) path just to catch up. Not to mention the fact developing countries represent (by a long shot) the majority of the world's population. It'll likely be years, even decades, before quick growth is exhausted.

 

Emerging markets are an increasingly powerful global engine—and the pistons should keep firing for a while. Just keep in mind, this is a race nobody loses—global investors least of all.

 

* Source: IMF, Thomson Reuters, Consensus Economics.

 

*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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