The latest Chart of the Week is actually 4 charts! Today we’re looking at Emerging Markets and comparing them to the S&P500. When money managers are bullish and positioning themselves for higher stock prices, they tend to invest in more speculative, higher beta names. When PMs are positioning themselves for lower stock prices, EM gets killed, particularly relative to developed markets.
These 4 charts represent divergences between Emerging markets and the S&P500 over the past couple of decades. When the S&P500 is making lower lows but Emerging Markets are simultaneously making higher lows, it’s been evidence of risk appetite for stocks and markets have continued to rally for years after the divergence.
The question: Is this time different? [Read more…]