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Emerging growth markets shine after a turbulent 2020 in the stock market. What comes next?

Published: December 14, 2020
Investor sentiment is definitely strong as we head into 2021 with a clean slate.
Emerging markets are expected to lead the global recovery, emerging markets indexes turned positive for the year in November and continued to rise.
By
JAKE
CARPENTER
Investment Editor

By any measure, the year 2020 has been a wild ride—from the coronavirus pandemic and resulting health scares and shutdowns to the turbulence of the stock market.
Although the year started strong, a sharp downturn starting on February 20 and ending on April 7 earned the ignominious honor of being the fastest crash since 1929.1 On March 16, the S&P 500 index fell 9.5%, its worst daily decline since Black Monday in 1987.2
Of course, we also know the subsequent story of recovery: The Dow Jones Industrial Average rose throughout the remainder of this year, hitting an all-time high of 30,000 for the first time ever.3
Nonetheless, 2020 will soon be in the rear view mirror and investor sentiment is definitely strong as we head into 2021 with a clean slate.
With the old saying of “past results are not an indication of future performance” in mind, it’s worth taking a look at what markets performed best—and worst—to this point in the year.
Information technology led the pack, with gains of about 30% through the third quarter, while consumer discretionary was not far behind at around 25%. Rather than being harmed by coronavirus restrictions, they were in fact boosted by ancillary aspects such as stay-at-home orders and increased reliance on technology for business and leisure.
Conversely, the hardest-hit sectors were energy (down nearly 50% due to travel restrictions among other causes), and financials, which dropped about 20% as a result of the sharp recession.4
Looking only at third-quarter results, significant relative strength was seen in consumer discretionary, information technology, and healthcare—but it is also an interesting positive sign to see a surge in materials, up 13.3%. Indeed, all primary sectors were in the green other than energy.5 Indicators are excellent that post-recession performance will continue to be broadly strong.
Potential Emerges in Emerging Markets
As history has proven time and time again, emerging markets are expected to lead the global recovery. After a challenging start to the year, emerging markets indexes turned positive for the year in November and continued to rise. Statistics show that 85% of the global population is located in emerging markets, yet they represent less than 50% of global GDP—creating a setup where there’s relative value as well as growth potential.6
Looking at the results in last decade’s Great Recession era, you get a glimpse at the kinds of returns you can get from broad exposure to emerging markets. From the lows in spring 2009, you could have made 100% gains by the end of the year.7
Even better than relying on an index, however, is strategically investing in emerging companies that are positioned to outperform. In the past, Growth Equity Report has picked emerging companies that experienced gains of more than 500%.
And here’s the best news: We have been following the market closely and our analysts have compiled a list of the top emerging CSE and TSX growth investment opportunities for 2021.

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