Emerging Market ETFs Will Lead the Way Out Of A Correction
02 November 2009 at 1:16 pm by Gary Gordon
When the credit collapse gripped the entire world, it was the Emerging Market ETFs that recovered before their developed world counterparts. In fact, as often as everyone (myself included) discusses the “March lows,” emerging markets actually hit rock bottom in November 2008 and hit “higher lows” in March 2009.
The rest, as they say, is “history.” Emerging Market ETFs have jumped straight into the stratosphere and have significantly out-hustled U.S., Europe and Japan ETF investments.
Now, with the volatility and “correction” throwing everyone for an uncertainty loop, it’s critical to take a look at the recent past. For example, the iShares Emerging Markets Fund (EEM) peaked on June 1 and bottomed on July 8 during an 11% pullback; meanwhile, the S&P 500 SPDR Trust (SPY) peaked on June 12 and bottomed on July 10 during its 7% sell-off period. In other words, emerging markets fell first… and they recovered first.
Flash forward to October. The U.S. was celebrating its earnings victories. Dow 10,000 was all the “rage.” And only a few market watchers seemed to notice that the iShares Emerging Markets Fund (EEM) had not joined the S&P 500 SPDR Trust (SPY) hitting new highs on 10/19/09; rather, EEM had its best finish on 10/14/o9.
Once again, emerging markets, perhaps because they are the riskier assets, were the first to struggle. And if the pattern continues… the pattern from November 2008 as well as the one from July 2009… you’d have to expect emerging markets to come back to life before the U.S. and other developed world ETFs.
The question, then… did the first day of trading in November (11/2/09) mark the start of anything upbeat? The iShares Emerging Market Fund (EEM) maintained a sunnier disposition than U.S. and European ETFs throughout the Monday session. However, until riskier assets are embraced with a little more “separation,” you may want to tread lightly.
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Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. The content does not represent investment advice, nor are the securities discussed suitable for every investor. Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.
Tags | "correction etfs" "eem" "etf ishares", "developed market etfs", "emerging etfs", "etf emerging"
