When 40% of the top 5% ETF performers are from a beaten-down category like emerging-market ETFs, I pay attention. A deeper look made me even more interested.
Punish the Winners?
While two months is obviously a short period, we still seem to be early in the emerging-market turnaround game. Five of the funds in the table suffered net investor outflows even as their performance overshadowed 95% of their ETF competitors.
The aggregate investment flow for the dozen ETFs on the list was negative $283.5 million. Investors actually bailed out of this summer’s star performers. Why? The most likely reason is simple: Investors still aren’t fully convinced that a new upward trend is in place.
To be honest, I’m not fully convinced, either. I would rather be patient — especially since some of our recommendations are already poised to take advantage of a major reversal.
If this reversal is real, I think it is still in the early stages. All dozen ETFs in the table show double-digit three-month percentage gains — but only three did the same on a year-to-date basis. Five were actually down for the calendar year through last week.
I plan to keep a serious eye on the beaten-down emerging markets, looking especially for signs a bull market is taking shape.
Before I go: As I was about to file this column for publication, I received a new report from Capital Economics Ltd., the London-based research powerhouse. The title made me stop: “Emerging-Market Equities Stop Underperforming.”
The date on their report is Sept. 16, 2013. I had to laugh because I had just written almost the same thing for you, on the same day, on the other side of the Atlantic Ocean.
Do great minds think alike? Maybe. But it goes to show that there are plenty of people who are watching for the next big trend. And if you stick with me, you’ll be just ahead of the curve … and that’s the best place to be!
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