Goldman makes 'call of decade' by promoting BRICs

Goldman Sachs Group Inc’s forecast that Brazil, Russia, India and China would eventually eclipse the Group of Seven countries economically has been described as “the biggest market call of the decade.” 

The chart of the day shows that stocks in the so-called BRIC countries have risen more than emerging markets as a group since November 30, 2001, when Goldman’s global economics team first assessed their prospects in a study. The comparison is based on MSCI Inc’s benchmark indexes. 

MSCI’s BRIC Index soared 367 per cent through yesterday to surpass the 22-country Emerging Markets Index by 134 percentage points, according to data compiled by Bloomberg. The MSCI World Index, a gauge of 23 developed markets that is also depicted in the chart, gained only 17 per cent during the period. 

Jim O’Neill, who still runs the global team, first made the case for the four countries in a paper entitled “Building Better Global Economic BRICs.” The firm elaborated in follow-up reports published in October 2003 and December 2005. 

“From where these markets stand today, even after the credit crisis, O’Neill’s original paper is starting to look like a once-in-a-lifetime call,” Joshua M. Brown, the author of the Reformed Broker financial blog, wrote this month. The “call of the decade” description was part of his posting. 

Brazil is the best-performing BRIC stock market since November 2001, based on a comparison of MSCI country indexes. India, China and Russia followed, in that order. Each of them rose more than the emerging-market gauge.