People tell me we’re in a bubble.
They tell me that stocks only go up.
“Long in the tooth” (whatever that means).
I see some of the biggest representatives of global growth making absolutely zero progress since 2007.
Click on Charts To Zoom In
I see 13 years of digesting those prior gains, which had been averaging around 100% per year (for 4 years) since inception. Seems like a well-deserved digestion of some pretty serious returns.
So now what? Can we finally move forward?
Today’s largest components in $EEM are worth noting: Alibaba $BABA, Tencent $TCEHY & Taiwan Semi $TSM. Not exactly natural resource plays!
If $EEM is going to break out, we should expect these names to lead the group higher. Here is the performance of these 3 stocks compared to Emerging Markets going back to the 2018 highs, when risk peaked globally:
We’re seeing real leadership out of these names. The relative strength longer term really stands out.
What about shorter-term? Are we seeing the same?
The answer is yes.
I think we want to continue to err on the side of higher prices for Emerging Markets. But I then we also need to think about the implications of that occurring.
What does that mean for other stocks and other groups?
Here is the Emerging Markets Index Fund compared to the behavior of Caterpillar, one of the largest components of the US Industrials Sector Index.
They look exactly the same to me.
I think it suggests Industrials are a place we should look (we’ve already been looking there), and Emerging Markets are likely to play catch-up.
That’s how I see it.
What am I missing? Let me know!
PS – it’s not the first time we’re bullish. Also see: