The Big Asia Trend is Still in Play

Today’s chart is an update on one of the biggest investment ideas in the world… one we’ve written about for years… and labeled, “Asia up, the West, not so much.” 
 
The trend is the gradual increase of Asian economic power… and the gradual decrease of old European economic power. Many European countries have declining population growth and onerous business regulations. This creates a headwind against the region’s stock and real estate prices. Many Asian countries have healthy population growth and are embracing free markets. This creates a tailwind behind the region’s stock and real estate prices.
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One of our favorite ways to monitor this idea is to compare the returns made in the big Singapore stock fund (EWS) versus the returns made in the big Italian stock fund (EWI). Singapore is a global financial hub and is considered one of the world’s easiest places to do business. It also sports a low corporate tax rate. Italy is deep in debt and tough to do business in.
 
As you can see from today’s chart, the big “Asia up, the West not so much” idea is still in play. Over the last six years, EWS (black line) and EWI (blue line) have plotted very different courses. Singapore is up more than 90%. Italy is down 40%. In other words, free markets work.