Location, Location, Location
The moral of the story is that it’s fine to invest in fringe markets when the world is binging on credit, but investors need to be more circumspect when the global economy slows. Economic cyclicals tend to outperform when the economic cycle revs up, but underperform when the economic cycle slows.Credit cyclicals outperform when the credit cycle revs up, but underperform when the credit cycle slows. Unfortunately, fringe markets are significantly exposed to both cycles.
Richard Bernstein is CEO and chief investment officer of Richard Bernstein Advisors LLC, an independent investment adviser. RBA partners with several firms including Eaton Vance Management and First Trust Portfolios LP, and had $3.1 billion collectively under management and advisement as of December 31, 2015.