Hide Away in Brazil or India

There’s a big debate about how much the U.S.’s obvious economic difficulties are spreading to the rest of the globe. Where in the world can an investor hide from the ripple effects of U.S.’s subprime trouble, its grumpy consumers and its weak housing market? Maya Bhandari of Lombard Street Research suggests Brazil and India might be the best spots. Much of the rest of the world is heavily influenced by the rest of the world, through trade, commodity prices and financial instability. But Brazil and India are insulated, for similar reasons. “With large domestic demand bases, limited reliance on exports and positive cyclical momentum, both economies and their assets seem a pretty good bet,” Bhandari writes. Both are growing fast to meet internal demand. So trade and foreign investment play less of a role. (One difference, she notes, is that Brazil is a bigger exporter of commodities, while India imports its raw materials.) The risk is that both nation’s central bankers may have a tough time managing inflation. “Aside from this, and in marked contrast to recent history, Brazil, India and their assets look like a pretty good bet,” she writes.

To continue reading this article you must be a Bloomberg Professional Service Subscriber.