The Emerging Markets Panic Is Overdone (EEM)

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July 27, 2018 6:20am NYSE:EEM

From Knowledge Leaders Capital: Recently, fears of a slowdown in global growth brought on by a trade war have led to turbulence in cyclical assets.


The US Dollar has risen while commodities and emerging markets have struggled. The Chinese Yuan has depreciated significantly, recalling fears of the 2014-2016 industrial recession. This quarter, we examine the outlook for economic growth and inflation, and how a trade war may impact the economic environment. From there, we discuss asset allocation through the lens of this economic environment, including:

  • A 4-quadrant look at the basic economic backdrop;
  • Why we are underweight both stocks and bonds;
  • Why we are overweight commodity-related cyclical assets;
  • Why now is not the US Dollar’s time to shine; and
  • Why the emerging markets panic is overdone.

Finally, we wrap up with our analysis of the global energy sector and why this is our largest sector overweight.

Download the slides here: What We Know, What We Think & What We Are Unsure Of

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The iShares MSCI Emerging Markets Indx ETF (EEM) rose $0.21 (+0.47%) in premarket trading Friday. Year-to-date, EEM has declined -5.50%, versus a 6.60% rise in the benchmark S&P 500 index during the same period.

EEM currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #3 of 87 ETFs in the Emerging Markets Equities ETFs category.


This article is brought to you courtesy of Knowledge Leaders Capital.


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