Fourth quarter projections show emerging economies will only outperform those of developed nations by only 2.8 percent. in the previous decade, this number was 4.6 points, no doubt buoyed by the 7 point outperform margin of emerging versus developed seen in 2009. Why is this? One reason is the decline we have witnessed in corporate earnings (compared to an increase for more developed nations).
International unrest, like that seen in Syria and Egypt, doesn’t bode well for emerging markets either. Emerging market growth is largely seen in the Materials, IT, Energy, and Telecom sectors, which can be more vulnerable to commodity price fluctuations in crude, natural gas, copper, to name a few.
The Trade:
Short EEM at $38.80
Stop Loss: $40.40
Target #1: $37.97
Target #2: $37.21
Target #3: $36.21