There are still looming risks to the bullish view of emerging markets. Tapering is an issue that is not dead. Last Friday, St. Louis Fed President James Bullard rankled markets when hesaid the decision not to taper in September was “close” and did not rule out a small reduction in the central bank’s bond purchases in October. The Fed will hold its next monetary policy meeting on Oct. 29-30. Other market observers believe it is unlikely the Fed lets 2014 without some tapering.
On the other hand, the longer tapering is left on the back burner, the more sanguine the environment for ETFs like EEM and VWO. That “better backdrop would likely impact funds flowing back into the emerging markets, with outflows not only decelerating, but reversing,” CNBC reported, citing Soc Gen.
iShares MSCI Emerging Markets ETF
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of EEM and SPY.