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Emerging Market (EEM) Looking to Outperform US Indices

Emerging Market (EEM) Looking to Outperform US Indices

Emerging Market has been lagging the US market in the past 10 years. One ETF which tracks the Emerging Market’s performance is iShares MSCI Emerging Market (EEM). The ETF gives exposure to large and mid-sized companies in emerging markets. Currently, the largest three holdings in the ETF are all technology-based companies, including Alibaba, Tencent, and Taiwan Semiconductor Manufacturing. The ETF does contain a lot of exposure to the Chinese market.

A look at the chart of the EEM below suggests a range bound performance in the past 10+ years. Since the Index bottomed in 2008, it has never been able to make a new high, unlike the US Indices.

Emerging Market Index is Range Bound in the Past 10 Years

In contract, the US Index S&P 500 has continued to rally and makes new high year after year since it bottomed in 2008 as the chart below shows.

S&P 500 (SPX) Continues to Make New High Year After Year

When we look at the ratio chart below between EEM and SPX, the ratio continues to decline since 2010 as the performance between US and EEM decouples. US market continues to extend higher while EEM trade in a multi-year range.