Emerging Markets “Emerging” As Focus Of Worry Over Trade, Strong Dollar, Credit Crunch

If you can’t tell from the cascade of negative commentary, you certainly should be able to tell from trend in share prices: emerging markets have become the focus of current worries about global trade, the effects of a strong dollar, and the potential for a credit crunch that often comes at this stage in the credit cycle. Add in political tensions that range from political interference with the central bank in Turkey, to fears of a “populist” winning the presidency in Mexico, to dread that Brazil’s election will descend into chaos and you’ve got serious downside pressure on emerging market stocks.

Today, the iShares MSCI Emerging Markets ETF (EEM) closed down 1.53% at $46.42. That pretty much negated the rally from $45.35 on May 29 to a high of $47.14 yesterday, June 6. The rally had moved the ETF above its 50-day and 200-day moving average, but today’s sell-off sent the ETF back below those support levels.

Today the iShares MSCI Mexico ETF (EWW) fell 0.86% to $43.83. The ETF has moved lower steadily since its May 10 high at $48.56. The iShares MSCI Brazil (ETF) closed down 5.13% today at $32.71. That’s down from $41.86 on May 10.

The iShares MSCI Turkey ETF (TUK), down 25.86% year to date, actually edged higher today by 1.42%. (ETFs beaten down this much do occasionally bounce.) At today’s close of $32.22 the ETF is far below its 50-day moving average of $36.60.

I don’t see the current worries over the possibilities of a global trade war or the likely increase in interest rates by the Federal Reserve next week doing this asset class any good.