Cash is pouring into emerging market exchange traded funds (ETFs), but it hasn’t come without concerns that a market top has been reached or fears that their growth could come at the expense of developed economies.
Just as those who speak of a bubble in bonds have been frustrated by the lack of a sharp drop in prices, emerging market naysayers have been wrong in their predictions that those markets will not just cool off, but plummet, says Dan Caplinger for The Motley Fool. [An ETF That Grows With the Global Economy.]
Whether there’s a top isn’t the only concern, either. Martin Crutsinger for Associated Press reports that emerging countries are benefiting from low-priced exports, which are powered by artificially low currencies. This has raised the distinct possibility of trade battles in the future. [The Potential of Emerging Market ETFs.]
Even if the emerging markets are the rage right now, they are still a good diversification tool for the long-term. They’ve even become less volatile.
Michael Patterson and Jeff Kearns for Bloomberg report that the MSCI Emerging Markets Index’s historic volatility, a gauge of price swings during the past three months, fell to 12.1 last week, the lowest level since July 2007.
- iShares MSCI Emerging Index Fund (NYSEArca: EEM)
- Vanguard Emerging Markets ETF (NYSEARca: VWO)
- SPDR S&P Emerging Markets ETF (NYSEArca: GMM)
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. 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.