Tap Into Global Growth Through Emerging Markets

Invest in the developing world and the domestic companies that sell to them.

Fifty years ago, the U.S. produced half the world’s goods and services. Now the figure is 25%. But that’s not the end of our world. In 2009, the U.S. sold more than $1 trillion worth of stuff to other countries -- from jets to coal to movies. In 2010, U.S. exports are on track to hit $1.2 trillion. That’s our ticket to prosperity in an increasingly competitive world.

Even as the U.S. economy matures, the rest of the world is expanding. Think of our share as a narrower slice of a bigger pie. The export surge confirms that the U.S. economy has plenty of vigor and plenty of customers for the goods we produce. For instance, the United Arab Emirates is on pace to double its imports from the U.S. this year, to $22 billion, led by airplane engines, cars, computers and telecommunications gear -- all of them big-ticket items. And manufactured exports have risen even as the number of manufacturing jobs has fallen.

Despite the shaky stock market, U.S. companies are bound to benefit from this trend. Non-financial companies in Standard & Poor’s 500-stock index get 40% of their profits from foreign sources; those profits make up 2.5% of the U.S. gross domestic product. And President Obama is on a mission to double U.S. exports in five years.

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HOW YOU CAN PROFIT

Boost your stake in U.S. companies that sell to rapidly expanding emerging markets. Companies related to agribusiness, such as Deere (symbol DE (opens in new tab)), are in a sweet spot, as is the aviation industry -- think Boeing (BA (opens in new tab)) and General Dynamics (GD (opens in new tab)). And General Electric(GE (opens in new tab)) financial services is reasserting its position as a leading maker of heavy industrial equipment, such as airplane engines.

You should, of course, invest in emerging-markets stocks themselves. Goldman Sach predicts that developing markets’ share of the global economy, now 37%, will reach 59% by 2030. Emerging markets’ share of global stock-market capitalization will jump from 13% today to 31% in 2030, Goldman says. The best way to own these companies is with T. Rowe Price Emerging Markets Stock (PRMSX (opens in new tab)), a member of the Kiplinger 25. (See Emerging Markets Hit the Big Time for seven emerging-markets stock ideas and Why Emerging Markets Are Worth a Look for other worthy emerging-markets funds to consider.)

Jeffrey R. Kosnett
Senior Editor, Kiplinger's Personal Finance
Kosnett is the editor of Kiplinger's Investing for Income and writes the "Cash in Hand" column for Kiplinger's Personal Finance. He is an income-investing expert who covers bonds, real estate investment trusts, oil and gas income deals, dividend stocks and anything else that pays interest and dividends. He joined Kiplinger in 1981 after six years in newspapers, including the Baltimore Sun. He is a 1976 journalism graduate from the Medill School at Northwestern University and completed an executive program at the Carnegie-Mellon University business school in 1978.