Bounce back

Question: How are emerging markets impacted by the strong dollar?

Martin Schulz: Well, the strong dollar is obviously not that good for international investing, generally. And specifically, it's tough for emerging markets. Like we saw in the late 90s when we also had a very strong dollar, that next decade was followed by very strong international outperformance, particularly emerging markets. And if you look to the next five to 10 years, our expectation from an asset allocation perspective is that emerging markets will probably return somewhere close to 5%, relative to some of the underperforming U.S. stocks and other areas of interest.

Martin Schulz: Those markets that are more commodity based are probably ones that are going to win out. So longer term, our top-down country allocation process is looking for those markets that have current account surpluses and have valuations, as well as obviously currencies, that are competitive. And those are the markets there that don't have budget deficits and areas that don't have deficits on the trade side that are going to do very, very well, such as Brazil, such as South Africa, Malaysia, and others that really have the ability to withstand any kind of potential shocks that the global economy may throw at them.