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Emerging Markets Have Been Leading Stock Returns in 2016

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Economic and political uncertainty impacted developed markets

Uncertainty and volatility seem to have become characteristics of the developed markets over the past two years, led by the following factors:

  • oil price plunge and uncertainty over the general election results impacting the US economy
  • Brexit vote impacting the European economy
  • strengthening yen adding to deflation in Japan despite constant policy measures

While developed markets have been caught in a lull, we’ve seen emerging markets grab the spotlight. Emerging markets have been leading stock market returns so far in 2016.

EM outperforming

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Emerging markets have been outperforming

The chart above shows the performance of the iShares MSCI Brazil ETF (EWZ), which has risen more than 70% since the beginning of 2016. The VanEck Vectors Russia ETF (RSX) has returned over 24% to investors so far this year. The iShares MSCI All-Peru Capped ETF (EPU) is also placed among the winners with a YTD (year-to-date) return over 60% on November 2.

Among the other emerging markets, India has an ~7% return, as gauged by the performance of the WisdomTree India Earnings ETF (EPI). China follows with the iShares China Large-Cap ETF (FXI) returning 3.7% YTD.

With respect to developed markets, US equities (SPY) returned ~2.9% on November 2. On that day, Europe (VGK) fell ~7% and Japan (EWJ) rose 3.2% YTD.

Consequently, the iShares MSCI Emerging Markets ETF (EEM) rose 13% with respect to developed markets (EFA), which are down 2.6% YTD.

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