Correlation With Emerging Markets Plunges
- Posted by JC Parets
- on June 14th, 2013
I hate to keep harping on the same topic – this emerging markets disaster. But I think there’s something else here worth mentioning, and then I promise I’ll leave it alone. John Murphy brought up a great point yesterday in that the six month correlation between US and Emerging Market stocks has been consistently positive for years. Any slight divergence between the two gets adjusted quickly by the market and immediately shoots back up towards one.
As you can see in this chart, correlations are plummeting. The weekly bars represent the S&P500 and the red line shows the Emerging Markets $EEM. The 6-month correlation is plotted at the bottom and takes us all the way back to the 2008 global sell-off.
So here is the question: Is this a new normal? Are US Stocks no longer going to be trading with Emerging Markets? These are two different worlds now and just something we need to get used to? Or is this a temporary divergence that will quickly be corrected by Mr. Market? And if so, will US Stocks come down, EM come up, or a combination of the two?
Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.blog comments powered by Disqus
J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He is a 10-year veteran and Market Technician who actively manages money incorporating Technical Analysis and Behavioral Finance into his practice. JC’s work has been featured regularly on CNBC, Fox Business, Bloomberg, Business News Network, Wall Street Journal and Yahoo Finance among many other financial media outlets. More...
- How To Prepare For a Lower Rate Environment
- Audio: Benzinga Morning Radio Show 5-21-15
- BNN Appearance: Agribusiness Stocks & US Dollars
- Agribusiness is My Favorite Base In The World
- Audio: Benzinga Morning Radio Show
- Here’s Why I like Shorting Disney Up here
- A Not So Happy Cinco De Mayo For the Mexico ETF
- One-Third Of the Year Is Over. Now What?
- What I’m Waiting For To Buy Base Metals
- The Must Follow Podcast: JC Parets
Archive by Year