How Each Country Deals With Inflation Differently

From the U.K. to Turkey, China to Japan [Click to view in browser](. Dear Reader, We have some BIG UPDATES for all you Markets and Minds subscribers. [And you need to take action now to make sure you don't miss out!]( Our newsletter got a complete makeover. We overhauled the format and layout of the newsletter, making it easier to read and simpler to follow. And gave it a nifty new title - THE JUICE [But you won't receive this newsletter unless you sign up HERE.]( Because pretty soon, Markets and Minds will disappear FOREVER! Proprietary Data Insights Financial Pros Top ETF Searches This Week Rank Name Searches #1 S&P 500 6,400 #2 Nasdaq 100 1,601 #3 Silver 1,023 #4 Small Caps 671 #5 2x Nasdaq 100 629 Emerging Markets Could Bottom Soon Our main story walks through the different ways each country is managing inflation. We particularly like countries ahead of the curve including Brazil (EWZ) and even China (FXI). Both kept or increased interest rates to fight inflation but not by so much as to smother the economy. Brazil’s EWZ ETF trades more than 32% off its 2021 highs and carries a weighted-average price-to-earnings ratio of 16.69. However, the ETF pays a healthy 5.69% dividend yield. And a strengthening Real against the dollar makes those earnings worth even more. China’s regulatory clampdown sent shares of US-listed Chinese stocks spiraling. However, the FXI ETF doesn’t have that problem since it directly invests in the Hong Kong Exchange. That’s created a nice value. Plus, China’s purge of overleveraged companies strengthens the country’s underlying fundamentals. And the FXI currently trades at a weighted-average price-to-earnings ratio of 13.2 and pays a decent 2.2% dividend. 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Turkey, on the other hand, cut interest rates, sending the Lira plunging to new lows as hyperinflation becomes a reality for the country. Each country is handling inflation differently. And it’s creating some VERY interesting outcomes. Cooked Turkey Let’s start with Turkey, Europe’s gateway to the Middle East. President Erdogan’s decision to slash interest rates 500 basis points since September spurred 21% inflation. Forecasts already call for 30% next year. It got so bad the country’s central bank directly intervened in the market to prop up the battered Turkish Lira. Despite pleas from his government, Erdogan refuses to budge on the issue. To be fair, the country has one of the highest interest rates in the world. However, the export-driven economy is in shambles with supply chains scrambled. Emerging Markets Beat The Fed To The Punch Unlike Turkey, most emerging markets including Brazil, Mexico, and Chile raised rates this year to combat inflation. Even Russia is in the mix with rates at a whopping 8.5%. Despite a slowdown, China kept interest rates high as it seeks to transform its economy and shed poorly performing companies and reign in real estate companies like Evergrande. United Kingdom Front-running the Fed, UK’s central bank announced a small rate hike to compare inflation, which was unexpected. Unlike the Fed, The Bank of England (BOE) doesn’t carry the dual mandate of inflation and unemployment. The BOE solely cares about currency stability. Interestingly, it’s the first time since 1991 that the UK’s inflation is higher than its unemployment rate. European Union’s Fakeout Officials at the European Central Bank (ECB) followed the Fed in cutting its bond purchases. However, it’s one of the few developed economies that refuses to substantially reduce monetary policy support in 2022 or at least talk about it. So far inflation in Germany, the EU’s manufacturing hub, hit 5.2%, while Italy came in lower at 3.7%. Japan Couldn’t Care Less 0.1% - Japan’s latest inflation reading YOY. Known for the lost decade of economic growth in the ‘90s, Japan appears to be immune to inflationary pressures. Citing this as evidence, the country’s central bank refused to speak of tightening, defending their extremely dovish stance. What This Means When everyone raises rates at the same time, it doesn’t really change the relative price of one currency to another. Instead, it dampens demand within the home country. That’s a key reason why the US and emerging markets need to raise rates. The EU is in a pickle since inflation differs for each of its members. The Bottom Line: History has shown that raising rates too quickly can push an economy into a deep recession if not an outright depression. That appears very unlikely in the US as well as Emerging Markets. We are concerned with the dovish approach by the EU as members like Germany have a historical animus towards inflation. From a sector perspective, we still favor regional banks and construction. We also like industrials that favor emerging markets such as Caterpillar (CAT). News & Insights Freshly Squeezed - [10 Stocks On Investors’ Radar After Posting Their Financial Results]( - [Early Read on Existing Home Sales in November]( - [5 Reasons Index Funds Are Not Great For 2022 (Peter Lynch: MISSING THE BOAT)]( [Make sure to sign up for The Juice to keep receiving our premier investment newsletter.]( # [submit to reddit]( [submit to reddit]( [submit to reddit]( To ensure delivery of all emails, [whitelist us](. Update your email preferences or unsubscribe [here](. View our privacy policy [here](. Copyright ©2021 InvestingChannel. All rights reserved. 1325 Avenue of the Americas, Floor 27 & 28 New York, New York 10019 Disclaimer: This is not investment advice. This InvestingChannel, Inc. newsletter is for information purposes only and opinion-based. 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