Turkey, Argentina, Bill discussed on Financial Engines Investing Sense
Senior investment analyst in the Financial Engines research center what's. Really cool. About having Bill on the show is that he always brings lots of charts lots of great information but the charts specifically help you visualize what. He's talking about we post all of those charts to investingsense dot com get there now here as we get started with Bill and another one of. Bills credentials is he is a CFO charter holder and that really. It does it makes him one of the smartest guys in the room when it comes to the economy markets and? Investments and what it all means to you so Bill, great to have you back on the. Show with us Yeah. Thanks for having me back about so your team recently made. Some changes to portfolios part of that move involved? Emerging market stocks give us, a little. Bit. More of the particulars here with these changes to the allocations yes so one of the decisions we. Made this kind of Pasco around was to slightly reduce. Your exposure to those emerging market, stocks it's a it's a relatively small piece of the overall pie, in the. Past we've actually removed from some, client portfolios. We, didn't didn't feel like getting that defensive wasn't necessity at this time. But it certainly you don't asset classical a lot of moving parts we're talking about some some, slowing growth in China, being a big risk for emerging markets you got the US. China trade tensions dominating headlines that's some reduced earnings growth. Expectations for. Some of these EM companies and now we've got the situation in Turkey you know the latest news story to kind of spark some concerns in. The asset class Bill Turkey has been in the headlines quite a bit lately what is the situation there as you see it both financially and market. Wise at least yeah so the high level rundown on on Turkey Situation, it's really a country going through. A whole host of issues I you got some some double digit inflation we've got consumer prices, up of nearly sixteen percent over the last year and then you've got Turkey as as? One. Of the emerging market nations with a large current account deficit so for the for the years nations been importing more than exports. And running, that consistent current account deficit really means that you're running up liabilities. And other currencies so when you've got. A weak currency you've got a problem and and we've seen the Turkish, lira depreciate a thirty five percent or so against the US dollar. This year so that's Turkey before we came into the studio ran into an old Spanish. Instructor of mine she's from, Argentina and she wanted to know about Argentina do you see Turkey being anything like Argentina. And some of the financial issues that they're, going through right now the market wiser banking wise yeah a lot of similarities but Turkey. Not quite to that same level right you know who's already. Gone to the IMF for that fifty billion dollar? Bailout but not coincidentally in, the same. Boat. As Argentina in Turkey both have that account Deficit depreciating currency. But when you. Look at the numbers you've got Argentina with six billion US debt maturing the. Rest of this year another thirteen billion next year. So the numbers are a little bigger on the Argentina side. When, it comes to paying back those dollar-denominated. Debts but you know whether we're talking debt or equity certainly emerging and, frontier markets is very risky asset class well let's let's go a little deeper into that Bill when you. Say risky asset class talk about the risks that comes from investing in emerging markets so you know we posted a chart over on investingsense dot com that's just. Shows the downs on the emerging market, index back to two thousand one basically I would just charting here's all the time that the index has spent below a previous high. And and when we see this this level of, volatility you know we got to remember that. A quarter of, the time for emerging markets over this. Period you're in a bear market mean the index is twenty percent or more away from its previous high so? More than, half the time? Like, sixty percent of a, timer so, you're you're at least ten percent. Away. From the, latest peak so it's not it's not going to be smooth sailing, when you're investing in these developing nations so we didn't want. To post another chart That kind of shows why folks that have the appropriate risk tolerance would would stick out that level of volatility. You know it's always about the the risk reward, tradeoff when it comes to investing so if your stomach. Strong, enough to ride out that high volatility it turned. Out well in the end but, you know you had you had to buckle up gonna put. You on the, spot walk through generally suggestions only that people would. Want to consider if you're conservative moderate aggressive what do you need to be thinking. About, as it relates to. Your particular emerging markets holdings that you may be seeing in your accounts, I e you know start at, the highest level am, I invested, in emerging markets at all right and then and then you take it. Down to the, to the next layer and you really can you wanna ask whoever you're you're working with if you're. Working with an adviser to to tell you what kind of countries. You're you're emerging market investments are exposed to where where you might. Have some of those trouble areas in your portfolio and and see if they can do a. Deep dive into the actual holdings in the The actual, companies, that, you're invested in and you know and then also nowhere always looking at how our portfolio managers that we invest in incorporate risk management into? Their process, so seeing, whether or not they you. Know they they actually end up getting all the. Downside in these market movements is an important thing when we're analyzing the funds that were investing awesome stuff Bill Tracy Financial Engines research center you're. A gentleman and a scholar thanks for taking some time here with us on investing sense hey. Thanks for having me back guys did want to give quick birthday shout out to my dad the guy that got me into finance investing in the first place so happy birthday that fantastic Birthday happy birthday settle. Really? Mr. Tracy anybody else if you wanna go. See your son's, or our friends charts hair just. Head.