Change of Heart: U.S. Trumping Emerging Markets as Investors Seek Stability
The political and economic conditions in developing and emerging economies are continuing to take their toll on companies exposed too heavily to these markets. Meanwhile, investors who opted to make plays into U.S. equities, especially during the earnings season, were rewarded as many firms in that sector have provided solid financial metrics and some amount of certainty to investors in a very uncertain world.
Protests in Brazil, currency destruction in India, and the slowdown in China are punishing businesses highly leveraged in these markets, especially firms like Yum Brands (NYSE:YUM), which depends on China for around roughly half its sales.
China is undergoing a period of economic restructuring as its communist leadership takes on more pro-market reforms while trying to create better quality and more sustainable growth moving forward. Still, these reforms have been marked by a slowdown in growth, as the state-controlled economy always seems to need one more reform.