Advertisement
Investing

How to Profit in Today's Economy: Tap Into Global Growth

Invest in emerging markets and the domestic companies that sell to them.

What it's all about. 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.

Advertisement - Article continues below

Why it's different this time. 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. The percentage of profits they derive abroad is rising steadily, and overseas earnings of nonfinancial firms in Standard & Poor's 500-stock index now make up 2.5% of U.S. gross domestic product. President Obama is on a mission to double exports in five years.

How you can profit. Boost your stake in U.S. firms that sell to rapidly expanding emerging markets. Companies related to agribusiness, such as Deere (symbol DE), are in a sweet spot, as is the aviation industry -- think Boeing (BA) and General Dynamics (GD). And General Electric (GE) is de-emphasizing financial services and 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 Sachs 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), a member of the Kiplinger 25.

Advertisement
Advertisement

Most Popular

Medicare Basics: 11 Things You Need to Know
Medicare

Medicare Basics: 11 Things You Need to Know

There's Medicare Part A, Part B, Part D, medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare --…
September 16, 2020
5 Unfortunate Estate Planning Myths You Probably Believe
estate planning

5 Unfortunate Estate Planning Myths You Probably Believe

These all-too-common misconceptions can steer your estate plans in the wrong direction right from the start. Here’s how to overcome them and tips to b…
September 17, 2020
Election 2020: Joe Biden's Tax Plans
taxes

Election 2020: Joe Biden's Tax Plans

With the economy in trouble, tax policy takes on added importance in the 2020 presidential election. So, let's take a look at what Joe Biden has said …
September 18, 2020

Recommended

Bonds: 10 Things You Need to Know
Investing for Income

Bonds: 10 Things You Need to Know

Bonds can be more complex than stocks, but it's not hard to become a knowledgeable fixed-income investor.
July 22, 2020
Best Bond Funds for Every Need
Investing for Income

Best Bond Funds for Every Need

In a changing market, it’s important to remember why we hold bonds in the first place.
September 15, 2020
Does a 40% Bond Allocation Make Sense in Today’s Portfolios?
retirement planning

Does a 40% Bond Allocation Make Sense in Today’s Portfolios?

For many investors, the short answer is no. Here’s why, and what you might consider instead.
September 7, 2020
Is the Stock Market Closed on Labor Day?
Markets

Is the Stock Market Closed on Labor Day?

The good news: Stock markets and bond markets alike get the day off for Labor Day. But traders don't get an early start to the weekend.
September 5, 2020