White Papers | February 26, 2013

Health Is Wealth: Health Care Spending As An Emerging Market Growth Engine

Executive Summary

We have little doubt that domestic consumption will drive the next leg of emerging markets growth. What we do question, however, are the consensus measures used to gauge which particular markets will actually succeed on this front. The traditional measures, including demographics, income levels, and macro vulnerability, are of course useful, but we think that one important factor is being overlooked: public health care spending. Our argument is based on a simple trickle-up effect: we believe a population with fewer health care concerns would equate to a population with healthier pocketbooks and, ultimately, to healthier domestic markets.

Below, we present various data showing the high correlation between public health care spending and domestic consumption. Selecting countries with high domestic potential is essential given that consumption growth is related to stock returns. We conclude that one of the most effective – and efficient – ways of boosting domestic consumption in emerging markets is through “efficient” government spending on health care.

Download full article here.

Disclaimer: The views expressed are the views of Mr. Bhartia and Mr. Pascual through the period ending February 27, 2013 and are subject to change at any time based on market and other conditions. This is not an offer or solicitation for the purchase or sale of any security. The article may contain some forward looking statements. There can be no guarantee that any forward looking statement will be realized. GMO undertakes no obligation to publicly update forward looking tatements, whether as a result of new information, future events or otherwise. Statements concerning financial market trends are based on current market conditions, which will fluctuate. References to securities and/or issuers are for illustrative purposes only. References made to securities or issuers are not representative of all of the securities purchased, sold or recommended for advisory clients, and it should not be assumed that the investment in the securities was or will be profitable. There is no guarantee that these investment strategies will work under all market conditions, and each investor should evaluate the suitability of their investments for the long term, especially during periods of downturns in the markets.
Copyright © 2013 by GMO LLC. All rights reserved.