The largest ETF for emerging markets is outperforming the S&P 500 for the seventh straight day.
Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) rallied about 5% last week while SPDR S&P 500 ETF (NYSEArca: SPY) added 1.5%. On Monday, VWO gained more than 1% to lead the S&P 500.
The iShares MSCI Emerging Markets (NYSEArca: EEM) has also rallied lately thanks in part to rebounds in hard-hit developing markets such as India and Brazil. [BRICs Lead Emerging Market ETFs]
The recent outperformance of emerging markets bears watching because the asset class has been such a disaster in 2013 on Fed tapering fears. Developing markets outperforming emerging markets has been the dominant theme is 2013.
“Emerging market stocks staged a very powerful rally, strongly outperforming the U.S., but without their own credit spreads narrowing in a commensurate way. This makes the move last week a bit suspect, with persistent leadership important to keep an eye on,” Pension Partners said in a note.
EEM is down about 9% year to date while SPY has delivered a total return of nearly 18%.
ETFs that invest in emerging market equities saw net outflows of $3.5 billion in August on Fed tapering talk, according to BlackRock. Investors have pulled $11.1 billion from emerging market stock ETFs year to date.