By Craig McAvinue – 2 August, 2025
"I am a weapon of massive consumption ♪ And it’s not my fault, it’s how I’m programmed to function ♪"
As August has come and gone and much of Europe feels summer is behind us with a very much “back to school” feel, the U.S. & global markets in general continued their upward trajectory. The S&P 500 marking its fourth consecutive positive month…
After some bounceback in July, the US Dollar got back on the downward trend…..
Data from Google Finance
The S&P 500 hit a record high of 6,508 on 8 August, though we did see some selling off of gains in the tech detector to finish the month a little lower.
I talk often about the big boys, the magnificent seven whose sheer size has an overbearing effect on passive investing. August though was a time for smaller cap companies to shine, with the Russel 2000 outperforming the larger indexes, with monthly gains of 7%
Investing in small caps carries a higher risk than their larger counterparts due to liquidity, financial stability and more exposure to volatility triggered by geo political and general market sensitivity. However well managed funds in these areas can produce good returns and allow some non-correlation with the multi trillion dollar businesses.
Emerging Markets is another area which carries significantly higher volatility and risk. Again though well managed portfolios for those with the correct time horizon and risk appetite can see good growth. It’s an area I’ve always looked at exposing some client monies to.
After all, the Emerging Market countries are where the majority of the world’s population live, India and China have over 35% alone.
The consumerism in these countries is set to grow at a much faster rate. Whilst still some way behind the US (which currently has around US$20 trillion of Household Final Consumption Expenditure “HFCE”, compared to China at US$5.8 trillion and India at US$2.3 trillion) the growth of this metric is expected to increase in China by 64% to US$9.5 Trillion by 2030. India expects 83% growth to US$4.2 trillion whilst the US projected growth is a more modest 15% in the same period.
With a younger, tech savvy population countries like India and China will continue to see a growing middle class therefore closing the spending gap.
The recent events in China, which has attracted leaders from many of these Emerging Market countries to attend the Shanghai Cooperation Organisation and Victory Day Military Parade suggests the world order could be changing. This will lead to growth in these areas.
Not many brands shout United States louder than Coca Cola, yet last year around one third of their revenue derived from the Emerging Markets. Whilst consumer staple giant Unilever, who own well recognised brands such as Dove Shampoo and Hellman’s mayonnaise made 58% of its sales into these areas.
This cannot be ignored when looking at long term investment. As more people from developing countries have more spending power, they will spend on the same things as those of us in the developed world do.
After all, who doesn’t like a Magnum Ice Cream (Unilever Brand!)
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