I Would Still Stay Away from Emerging Markets for Now

Igor Manukhov - Mar 22, 2024
I would still stay away from emerging markets.
A few months ago, I pointed out that emerging market stocks had been underperforming other jurisdictions and therefore did not deserve a place in a portfolio at that time. Since then, emerging market stocks have been on the rise, and some people have asked me if it's time to reconsider them. I reviewed that market, and my stance remains unchanged: I would still not invest in it for now. The chart below illustrates why.
 
The black line in the bottom panel represents the price of an emerging market ETF. As I previously mentioned, it has been trending upward recently. However, the red and green relative strength lines continue to decline. This suggests that, on a relative basis, emerging markets are still underperforming Canadian stocks (red line) and US stocks (green line). Given this, I recommend staying away from emerging markets until they show improved relative strength against North American markets.