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Financial Articles from Hefren-Tillotson

The BRICs Are Back

June 21, 2017

The BRICs are back. The acronym was coined in 2001 as part of a prediction that Brazil, Russia, India and China would become leading economies of the 21st century.

The prediction proved timely, as rising commodity prices benefited emerging markets as a whole. The BRICs and emerging markets later crumbled, however, as commodity prices sank during the global financial crisis and remained depressed for many years. Stock prices in these regions fell more than 50% from 2007-2015.

Russia was hit the hardest as oil and gas prices collapsed, forcing the country to devalue its currency in 2014. Falling commodity prices likewise precipitated the worst political crisis in the modern history of Brazil. China suffered its own slowdown, culminating in a devaluation of its currency in 2015. India, meanwhile, remained relatively resilient.

Now the BRICs are enjoying a rebound. For the first time in three years, all four economies are growing. Stock prices for these countries are up 15% in 2017 and 30% year-over-year. China is benefiting from stimulus spending and looser restrictions on lending. Brazils political situation has improved. India is enjoying the fruits of economic reforms. Even Russia is enjoying a rebound as stabilized commodity prices give the embattled country a lift.

Many BRIC stocks are inexpensively valued, in our opinion, trading at under 15x price-to-earnings. Increasingly, our favored mutual fund managers speak of finding opportunities among these countries (perhaps excluding Russia) amid the improved economic and political outlook.

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This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.