In Part Five I explained the relationship -- negative correlation -- between commodities prices and the U.S. dollar.
Nearly as notable is the same -- on a trend basis -- with regard to the dollar and emerging market equities.
Note that much of the production of the world's commodities takes place within its emerging countries. Therefore, from that angle, indeed, the relationship makes sense.
Here's a 30-year look:
"...existing trends of better education and increasing urbanisation are expected to continue over the coming decade. Behind them should follow average income and consumption levels.
But there are obstacles in the way. One is the steady stagnation of India’s manufacturing sector. Reforms and investment in infrastructure are needed to boost the sector, increase efficiencies and create further jobs. Many of the foundations have already been laid, and India’s Prime Minister, Narendra Modi, is committed to his ‘Make in India’ initiative, designed to further unleash the country’s potential."
"...with Covid shifting the makeup of global supply chains, India and its large workforce could attract further attention from foreign companies.
Silicon Valley hasn’t been slow to notice this potential. Earlier this year, Apple announced its plans to shift some of its production lines from China to India, to cater to both export markets and India’s domestic demand. Other Big Tech giants have steadily been building their presence in the country."
"Of course, this is an emerging market, and as such it could present a riskier investment destination than others. A full recovery from the COVID crisis could take time as well, even with vaccine hopes rising by the day.
But there is an encouraging outlook here, especially when parts of nearby China are starting to look expensive. A combination of favourable demographics, shifting supply lines and reforms designed to encourage growth could make India an attractive proposition for investors looking to diversify their portfolios geographically."
So, yes, we're eyeballing India, by itself, as a potential destination for a portion of our emerging markets exposure. It's presently the third-largest country weighting -- accounting for 10% -- in our current emerging markets exposure.
My only hesitation is the timing, as Indian equities' recent runup (reflected in this year's performance of our emerging mkts ETF [+12.8%]), and their relatively rich valuations, like so many other things of late, fly in the face of present underlying fundamentals: