[Chart of the Week] Emerging Markets Diverged Positively
My argument is no, this time is not different. It's actually part of our bullish case for stocks:
Click On Charts To Zoom In
From the 2004 low, the S&P500 rallied for over 3 years. From the 2009 low, the S&P500 rallied for over 2 years, before continuing for another 4. From the 2016 low, the S&P500 rallied for 2 more years.
We can argue back and forth all day about what constitutes a rally, where does it end, how do you define a correction, and the list continues. I think the bigger point here is that when Emerging Markets have diverged positively in the past vs the S&P500, it has been evidence of risk appetite from a longer-term perspective. These are NOT tiny rallies lasting a month or two. They last years.
Another counter-argument is that we only have a sample size of 3 here and I really hate tiny sample sizes. But again, I think the bigger point here is that it is evidence of risk appetite, not risk aversion. That's what I'm trying to get at.
This is just one data point and we never want to make decisions off just one, or two or even 10. We want to weigh all of the evidence and approach the market accordingly.
By our work, this is evidence of risk appetite for stocks and is just one more thing to add to the bullish stance we've had all year.
JC