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[Troubled Waters Ahead For Developed Markets. Look Here For Returns.] By Sven Carlin on September 15, 2016 [pexels-photo-4] - Europe and Germany aren’t the best places for international diversification right now. - The U.S. is looking a bit better, but you’ll find the best opportunities are mostly in emerging markets. - Look for companies that are relatively cheap and that have exposure to China, India, and/or Brazil. Introduction [Two days ago] we discussed what is going on in the markets in relation to monetary policies. Today we will discuss what is going on in global economics. As the market is showing a high level of volatility, basic economic fundamentals is where we should look to get answers on what to do. By analyzing the latest global economic indicators, we can better determine the risk of a recession in the U.S. and Europe or a slowdown in China, all of which could contribute to a decline in global markets. Germany Let us start with Germany, which is the motor of the European economy. In Germany, even corporations are now issuing debt with negative yields, however, it hasn’t had the desired effect on increasing productivity and growth. German industry production decreased 1.2% in July 2016, which isn’t a good sign for Germany and Europe. [figure-1-german-industrial-production] Figure 1: German industrial production. Source: [Trading Economics]. This decrease is even more worrisome considering that the Euro is in an historically weak spot which should boost exports. Instead, exports decreased by 10% in July. [figure-2-eur-usd] Figure 2: EUR per 1 USD. Source: [XE]. Thankfully for Europe and Germany, the negative yields lower the value of the Euro globally, but any sign of higher interest rates—be it from inflation or economic improvement—would put significant pressure on the economy and markets. This would create an environment with limited upside potential and a large downside. If you want to diversify into Europe, you might want to wait a bit and diversify when things look really bad. Most European companies are global players and turmoil in Europe would create the opportunity to buy great global assets at cheap prices. We aren’t yet there, but with monetary stimulus no longer working, the decline could come very soon and be very painful. The U.S. Things in the U.S. are better than they are in Europe, however from an economic perspective, the situation isn’t what we’re used to. Economic growth is the slowest in last 12 expansion periods, expansion periods which didn’t have the monetary stimulus this one enjoyed. [figure-3-gdp-growth] Figure 3: Slower economic growth. Source: [Wall Street Journal]. Additionally, rail traffic decreased by 5.7% in August and the ISM services index dropped to 51.4. This is the lowest level since the Great Recession, and the best case scenario still leads to slow economic growth. Slower economic growth indicates that the world is changing, both for the U.S. and for Europe. Quality of life is improving, but economic growth is lagging behind global growth. We can’t know what to expect in the future, but for now the trend in developed countries is clear: slow economic growth for a longer period of time. The slower the economic growth, the closer we come to a recession. This represents the biggest scare for investors, and, of course, a big opportunity. Before we get into that, let’s discuss the rest of the world. [Easy-to-use Signal System Picks Stocks With Uncanny Accuracy] Here are several stocks our system said to buy: WNC shot up 288% after system said BUY VCI shot up 233% after system said BUY ETM shot up 953% after system said BUY Plus ... get over $398 worth of valuable books, videos, and reports just for trying this system risk-free for the next 30 days! [Click Here To Try It Risk-Free For The Next 30 Days!] [Misunderstood Option Strategy Earns Novice Trader $41 Million In Only 3 Years] Find out how you can use it to immediately generate substantial income when the market opens on Monday ... even if you're starting with limited funds. It's safe, reliable, and can be duplicated over and over again to generate income you can use right now if you want. Or you can let it snowball into even more. [Click Here To Learn This Strategy] The Latest From China, India & Brazil China did some monetary easing, but the bulk of its stimulus came from government spending which is different than relying only on the central bank. Increased government spending is working and is beginning to show some results. Industrial output rose 6.3% in August, real estate investments increased 8.1% from the previous year, housing sales increased 25.6% in the first 8 months of this year, and retail sales grew 10.6% in August. Such data is something developed countries can only dream of, but as smart investors we need to use macro trends for our benefit. The first option would be to invest directly in China. Commodities, especially metals, are another good option as they give you great exposure to what is going on in China and are also currently coming out of a bear market, enabling you to buy on the cheap. Things are also going well in [India]. Inflation is above 6%, services are growing at 9.6% (inflation adjusted), agriculture is growing at 1.8% and industries are growing at 6%. The Brazilian economy is still shrinking, showing that it won’t end the year out of recession. However, the decline is slowing down and things seem to be stabilizing. [figure-4-brazil] Figure 4: Brazil economic growth. Source: [Trading Economics]. Conclusion The economics are clear. Emerging markets have a big advantage over developed countries. In the midst of the current volatility, a good idea is to look at assets that have global exposure, i.e. companies that have sales all over the world and that will highly benefit from continued growth in China, a boom in India and better conditions in Brazil, but that still get the benefits of developed markets even in a slower growth environment. Look to long term investments, investments that will be there no matter what happens or how scary the market gets, and look at the decline in developed markets as an opportunity to buy great assets at a discount. 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