International markets have allured many exchange traded fund (ETF) investors, only to find the markets in Europe and Asia are tied to the United States. Even emerging markets have become correlated enough that they’re getting hit hard right now.
Sam Mamudi for The Wall Street Journal explains that investors’ favorites such as Brazil and Russia have fallen in part to declining commodity prices, proving that the diversification factor isn’t so easily achieved.
Enter frontier markets.
The growing economies of Africa, the Middle East and deeper into Asia and South America are represented by this title. These markets have delivered better returns this year than emerging markets. These ETFs, however, are not in positive territory at the moment. They are, however, more decoupled from the U.S. economy than other emerging markets. Since they have so much room to grow, they stand to outperform once the global economy gets back on track.
- iShares MSCI Emerging Markets Index (EEM) is down 23.1% in the last month, and 34% in the last three (black line)
- Claymore/BNY Mellon Frontier Markets (FRN) is down 18.1% in the last month, and down 31.9% in the last three (green line)
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.