“The emerging markets horror stories are overdone,” says Stammers. “The biggest issue is if you own lots of money in dollars and the interest rate goes up, you will have to spend more paying your debts off.”
Roll with the punches
Despite the Chinese stock market experiencing its biggest weekly slump since 2008, dropping 13.3% in the seven days to 20 June, Stammers says these episodes are just part and parcel of the emerging markets rollercoaster. He is in for the ride with holdings in the Goldman Sachs N-11 Equity Fund and Templeton Emerging Markets Investment Trust.
“The key is the long-term picture,” he says. “Emerging market capitalisation in 10-years’ time will be an awful lot more than it is now. Rather than adjusting your portfolio as the benchmark weighting to emerging markets goes up gradually, get the positions in now.
“Emerging markets is an area where there are some real opportunities – but you have to be prepared for some nasty bumps along the way.”
This patient approach extends to Stammers’ view on global equity markets in general, where, despite valuations being almost fully priced across the board, he is cautiously positive.
“There are opportunities out there and money to be made but return expectations need to be lower,” he says. “People made a lot of money in 2013- 14 when there was so much bad news around, and now that everything is so much better, they are expecting to make even more.
“But that is not the case. Equity valuations picked up in anticipation of earnings being delivered. Now we are in the phase of those earnings being delivered, and the question is now over how much better they can get. I would be very surprised if we saw double-digit returns this year.
“We are expecting a bumpy ride. If the US market experiences a hiccup, then everyone else is due a burp – that is just the way it works.”
