As Russ explains, dismal performance of emerging markets this year has make them look like a bargain again.
Following a stellar 2017, emerging market (EM) equities are once again on the back foot. The MSCI Emerging Market Index is trailing developed markets stocks by roughly 8% this year, despite rallying in recent weeks. Unlike the U.S., EM equities never enjoyed a real bounce since the late winter sell-off.
With the exception of a few outliers, notably Russia and Mexico, most of this year’s worst performing equity markets are EMs (see Chart 1). Developed market stocks, led by the United States, have recouped most of their winter swoon. In contrast, EM stocks are still down 14% from their January high in dollar terms.
The consequence of the selloff? EM stocks are once again looking like a bargain. Here’s why: