Why emerging markets have underperformed in 2014 so far



Is it time to abandon underperforming emerging markets in favor of bets closer to home? Clearly “no,” says Russ and he explains why.

While the U.S. equity markets have rallied year-to-date, emerging markets have largely sat out the party.

Year-to-date, Emerging markets are up around 1.5%, and the U.S. stocks are doing far better. Their underperformance can be blamed on disappointing growth figures and the bias of many investors toward markets that feel the safest (i.e. the United States).

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Market Realist – The graph above plots the price performance of the S&P 500 (SPY) against the iShares MSCI Emerging Markets ETF (EEM) on a year-to-date basis. Emerging markets (VWO) had a tough start to the year before recovering later on. On the other hand, the S&P 500 (IVV) has had a steady year, scaling all-time highs recently. The U.S.-based index has given returns of 7.3% year-to-date versus a meager 1.5% return from the emerging market ETF. Emerging markets‘ mediocre performance is partly because of poor economic data from China (FXI).

Please read the next part of this series to learn one key reason why investing in emerging markets could yield good returns.


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