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In the latest episode of Trader Talk, host Kenny Polcari and guest River1 Asset Management CIO Rob Haugen discuss why he avoids playing in China and emerging markets. Broadcasting from the New York Stock Exchange, Polcari draws on decades of institutional experience to help investors navigate market challenges and capitalize on safer opportunities.
Polcari explains that he steers clear of China because of its unpredictable regulatory environment. “China can change your rules midstream,” he warns, adding that one day you might wake up to find your investment dramatically altered by a sudden policy shift. In his view, emerging markets carry too much risk, so if investors do venture into them, they should only allocate a tiny portion of their portfolio. He emphasizes that there are far more opportunities in developed markets and large-cap names, which might seem boring but offer consistent, reliable returns.
Haugen reinforces this sentiment by introducing the concept of “stroke-of-a-pen risk.” He notes that a simple regulatory change—a stroke of a pen—can wipe out an investment, a risk that is particularly pronounced in China. Haugen argues that investors should focus on markets where management is aligned with shareholder interests and the regulatory framework is stable.
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In essence, both experts agree that while emerging markets like China might offer growth potential, the inherent risks and unpredictable policy changes make developed markets a safer bet for long-term, steady returns.
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This post was written by Langston Sessoms.