Why Emerging Markets Aren't as Cheap as They Look

On the surface, when you're looking at the discount from China or emerging markets relative to the US, it looks like it's very low. But on the other hand, if you adjust for the sector weights, then these countries and regions are not as cheap as it appears. And historically, that discount has not always been an indicator of good forward returns. The growth part of the emerging market benchmark does still look pricey. If you strip out the stocks that are in that lower valuation group, they have, they're at lows that we haven't seen in a long time.