October 1, 2004
Investing Outside the U.S.
The United States’ economic recovery, which seemed to be a foregone conclusion in the spring, hit a summer swoon that virtually erased all of the gains that the Dow Jones Industrial Average, Nasdaq, and S&P 500 indexes had amassed during the first quarter of 2004. With the U.S. markets returning to the sluggish ways of the last recession, where is an investor to go for profits? The overseas markets may offer some hope. With the euro becoming one of the world’s strongest currencies, China’s economy approaching double-digit rates of growth, and other emerging markets showing promise, the world economy offers great opportunities for investors to diversify their portfolios and capitalize on the strength of fast-growing companies in foreign countries. We assembled four international investment professionals to discuss the best ways to approach the international markets and how to avoid the risks. The members of our roundtable are Eddie Ramos, head of the international equity division for Baltimore-based Brown Capital Management Inc., ranked No. 4 on the BE ASSET MANAGERS list with $5.5 billion under management; Ron Holt, managing director of research at Hansberger Global Investors, sub-adviser for the Harris Insight International Fund, which holds $180 million in international and global equities; Clifford Mpare, managing director of research, portfolio manager, and head of hedge funds at Piedmont Investment Advisors, a Durham, North Carolina-based firm with $400 million under management; and Thomas Mims, founder and CEO of Emerging Africa, a New York-based third-party provider of financial information to Bloomberg that specializes in the African capital markets.
BLACK ENTERPRISE: What is your forecast for the U.S. economy in the second half of 2004 and first quarter of 2005?
RON HOLT: While the underlying economy has been performing well and you’re seeing an increase in the level of jobs, and that’s all positive, there are other issues that continue to be potential negatives for the U.S. economy. The uncertainty of an election will probably lead to a bit of uncertainty for the U.S. economy and specifically for the U.S. dollar, which we expect to continue to weaken from this point.
CLIFFORD MPARE: I think the U.S. economy is strong, but we are seeing some signs of a slowdown. The question is whether this is a pause that refreshes, or if there will be a termination of the economic expansion. There are suddenly some issues that we have to be concerned about. The twin deficits—budget and trade—is certainly one. The depreciation of the dollar is two. We have problems generating employment. But corporate profits are still on the rise. In the first quarter of this year, corporate profits were over 20%. Corporate profits should be up again by 20% in the second quarter.
We believe the second half of 2004 will be a little better than the first half, but we’ll be watching the Fed in terms of its direction with interest rates. We’ll also be watching inflation, but we don’t believe it will overheat as we move into the second half of the year.
EDDIE RAMOS: What’s going