Now I know this post will bore the hell out of some of you, but at this time of year it’s important to take stock – no pun intended – of how your investments are doing related to overall market, currency and commodity performances. Since it’s nearly September (in New York known as “get back to work time”), you’ll want to see which of your holdings have gone gangbusters and, perhaps, take a more offensive position, if you like risk, or a more defensive position to protect gains achieved in the last eight months.

Brad Sorensen, CFA, Director of Market and Sector Analysis, Schwab Center for Financial Research, wrote in a recent report that while the United States is showing signs of economic stability, even more positive signs are coming from companies abroad – especially emerging markets.

“As a result, we believe US investors can take advantage of this opportunity by shifting some assets into the more globally exposed sectors. As this story becomes more well-known, the trade can get played out, but we see signs that there is still further to run.

We continue to believe that global reflationary policies, combined with the possibility of a continued weakening of the dollar will benefit the more cyclical technology, industrials and materials sectors.

In contrast, we believe the defensive-oriented consumer staples, telecommunication, and utilities sectors will underperform.”

S&P 500 sector data shows information technology up nearly 40%, the materials sector, which includes everything from concrete to wood, up 30%, and consumer discretionary goods, like high-end clothing, hotel rooms and prescription drugs, have risen 22% year-to-date. On the reverse side, consumer staples are up only 2%, telecommunications stocks are down 10% and utilities are slightly in the red.

A portion of the above recovery in the United States comes from a nice bounce in exports, with internationally-based revenue accounting for 40% of the S&P 500’s revenues, according to Schwab.

So should you get in to emerging markets? I know, it sounds like 1999 all over again, right?

Sorensen’s belief is that what has been performing well so far this year will continue to do so. I, though, would introduce a bit of caution since US markets, which include many international companies with exposure to emerging markets, have done surprisingly well coming off the doomsday lows seen early in 2009.

The Nasdaq is clearly the winner during the past year-to-date, up 32%, compared to 10% for the S&P 500 and just 5% for the Dow Jones Industrial Average. The Russell 1000, a measure of small-cap stocks (meaning companies whose share price multiplied by the number of outstanding shares is less than $2 billion) has climbed 12% so far this year.

The International Monetary Fund, or IMF, agrees with Sorensen though. It is forecasting GDP growth of 1.5% in 2009 and 4.7% in 2010 for emerging markets. In contrast, advanced economies are expected to fall 3.8% in 2009 and then increase 0.6% in 2010.

A weak dollar will continue to make US goods cheaper abroad and propel companies with business in countries like Brazil, Russia, India and China. U.S. interest rates, which when hiked result in a stronger dollar, are unlikely to go anywhere. Fed Chairman BenBernanke has said as much in recent speeches and in an Op-Ed in The Wall Street Journal.

The dollar is already off 11% against the British pound year-to-date, down 10% versus the Canadian dollar and 15% against the Australian dollar. The U.S. dollar has fared better against the Euro, sliding only 1% so far this year.

Jumping commodity prices are also a good indicator that emerging markets – who hold a lot of the copper, aluminum and, yes, oil – will be key players in world economic growth in 2010. Most of these countries will feed the economic behemoth known as China, whose second-quarter GDP grew by 7.9%.

Already, we’ve seen a 112% rise in the price of copper in 2009, a 92% increase in lead prices, an 86% rise in nickel, 64% in zinc, 56% in oil and 33% for platinum.

The safest way to go about playing the emerging market game, and yet maintaining somewhat of a defensive position, would be to invest directly in U.S.-listed companies who get a lot of business from abroad or who are direct commodity plays. I’ll let you do your own research here, since I don’t want to recommend specific companies, but know that they’re out there.

Be aware though, as Sorensen said: once other people figure out these trades, you’ll have to be well onto your next move! Ah capitalism…

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