- Emerging markets' rapid economic expansion has sparked explosive demand for industrial products, raw materials, and energy to fuel massive internal development projects.
- Other developed nations have also outpaced the US and contributed to healthy global demand.
- Increased foreign demand compensates for slower growth domestically and pulls the US along in its wake.
(Editor's Note: MarketMinder does NOT recommend individual securities; the below is simply an example of a broader theme we wish to highlight.)
Way back in 1971, still high on the groovy 60s, Americans wanted nothing more than to buy the world a home and furnish it with love. We wanted to teach our brothers and sisters to sing in perfect harmony. And above all, we wanted to buy the world a Coke. One of history's most popular ad campaigns tapped the American desire to open up borders, begin productive partnerships, and export our unique brand of ingenuity to the world at large.
Since 1971, global consensus has helped reduce trade barriers considerably. And with help from other positive developments like more modernized markets and reduced regulation, the last five years have witnessed developing economies from China to Brazil undergo almost unprecedented growth. Their economic expansion has sparked explosive demand for industrial products, raw materials, and energy to fuel both massive internal development projects and fledgling industry.
Consequently, we've seen strong performance during this bull market from Industrials, Materials, and Energy stocks. See our previous cover stories for more on these market drivers:
"The Industrials Evolution," 4/4/2008
"It's a Materials World," 3/13/2008
"Oil On Canvas: Today's Energy Landscape," 3/6/2008
But healthy growth has not been isolated to emerging markets. Though US stocks outperformed foreign in the '90s, so far this decade, non-US developed stock markets are beating the US by almost 50% cumulatively. Additionally, foreign economies have mostly outpaced the US over the same period.
Recent history reinforces the importance of investing globally. But it also displays compelling evidence that overall global strength can counteract weakness in any one of its constituents (no matter how big). As non-US economies continue growing, demand for US products will remain firm. And where domestic demand may be slowing, international orders can help bolster balance sheets.
American energy behemoths are posting record profits on high energy prices linked to emerging market demand. And as the global bottom line is boosted, big American tech and services companies should also profit from foreign demand. Even traditional blue chips like Coca-Cola have gained from non-US growth. Coke's recent earnings report bears a distinctly international flavor. It's no surprise that building new bridges, highways, and cities makes a body wicked thirsty. It seems now the world wants to buy itself a Coke! Which is nice for us because we don't have to foot the bill.
International Sales Boost Coca-Cola Profit
By Staff, Reuters
Provided trade remains free and economies keep moving towards increased autonomy and openness, aggregate global growth should continue to benefit us all in the long term. As the world keeps growing, it's hard for one nation, even one as large as the US, to slow much or reverse course for a significant period—we're too interconnected, which is exactly what those hippies were singing about in that commercial. Buying the world a Coke is nice, but it's nicer when everyone can afford to buy their own.
For more information on the energy sector, visit the Fisher Investments on Energy website.