Can the U.S. Be the Growth Engine for Emerging Markets?

April 18th, 2013

by Chris Kimble

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Are emerging markets are the growth engines of the world? Have you heard this pitch for years? Could this pitch be the reason that two of the four largest ETFs in the world are emerging markets ETFs, despite relative weak performance compared to the S&P 500? I'm not saying it won't happen … it just hasn't happened over the past few years.

The above performance chart compares the two largest ETF's in the U.S., reflecting a 30% performance spread between SPY and VWO over the past 5 years.

Well that is the past. The more important question is … can the S&P 500 pull leading Emerging/Asian markets higher? Check out the patterns and what is happening in two of the four largest ETF in the U.S. right now.

This 4-pack illustrates the attempts to break support lines dating back to the 2008 lows in VWO and EEM on the left, and China ETF (FXI) and the Hang Seng index are pushing big time on similar support lines.

Humbly I don't know who is driving the train from a leadership/growth role! I do have a gut feeling that if EEM, VWO, FXI and the Hang Seng index break the support levels in the above 4-pack, they sure could impact the prices of the major U.S. stock indexes!

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