US vs. Emerging Markets: What are the Trends for 2015?
We are still in the early months of 2015, but when we start looking at the broader trends between the US economy and emerging markets — some interesting developments have already occurred. What’s more, these trends are likely to dictate how each region is likely to perform into the latter parts of the year. For investors, this can be valuable information because there are clear momentum trends that can be used to gain exposure to some market sectors in favor of others. Here, we will look at some of the factors influencing market activity in both the US and emerging Asia.
“Perhaps the central factor to consider is the recently stated policy at the US Federal Reserve,” said Michael Carney, stock markets analyst at Teach Me Trading. “Any further suggestions that interest rates can remain low will likely send stock prices to new highs for the year.” This is important because Federal Reserve Chairman Janet Yellen has recently stated that the Fed has no immediate plans to raise interest rates. This news comes as currency valuations in many emerging markets have suffered — and this has helped bring down market valuations in other sectors (like stock markets). As long as this continues, stock prices in emerging Asia could see additional selling pressure, even though there is a relatively high level of optimism in areas like the US and UK.
To gain a better sense of these trends, we will next look at the recent chart activity in both the SPDR S&P 500 Trust ETF (NYSE: SPY) and the iShares MSCI Emerging Markets Asia ETF (EEM). An assessment of the trends here could be important for determining where each of these markets are headed into the second half of 2015.
SPDR S&P 500 Trust ETF (NYSE: SPY)
(Chart Source: CornerTrader)
The SPDR S&P 500 Trust ETF (NYSE: SPY) tracks market activity in the S&P 500, which is the most commonly traded stock index in the US. The index includes a wide variety of companies from a number of different sectors and is often considered to be a proxy measure of that is happening in the US national economy itself. When we look at the overall direction of the price activity here, the basic trends start to become abundantly obvious.
iShares MSCI Emerging Markets Asia ETF (EEM)
(Chart Source: CornerTrader)
The iShares MSCI Emerging Markets Asia ETF (EEM) shows a picture that marks a stark contrast with what is happening in the S&P 500. The price declines for this market measure started back in September of last year — and have shown no signs of abating in the months since. This is obviously quite troublesome for investors that are looking to gain exposure in emerging markets. And, at this stage, there is little evidence that these downside trends have reached their completion point. For these reasons, it will be critical for investors to continue watching currency values for emerging Asian markets.
As long as these currencies continue to show weakness, these trends are likely to continue. So, while it might seem we are still in the early stages of 2015, the markets have already shown trends that could define broader activity for the remainder of the year.