Michael Hartnett, Merrill’s chief investment strategist, also pointed to emerging markets as one of the current areas of weakness as investor appetite for risk wanes and expectations for global growth fall, especially as the Federal Reserve prepares to end its bond-buying program next month.
“The poor performance… is a harbinger of lower liquidity, the end of excess returns and the end of excessively low volatility,” Hartnett said in a note.
The quickly appreciating U.S. dollar has also weighed on key emerging market currencies. For example, the Turkish lira, South Africa’s rand and Brazilian real have been feeling the pressure.
Moreover, the Bank of International Settlements also voiced concerns over potential capital flight from illiquid emerging markets, which could exacerbate price movements. [Emerging Market Volatility Rising as More Utilize ETFs, Funds]
For more information on developing economies, visit our emerging markets category.
Max Chen contributed to this article. Tom Lydon’s clients own shares of EEM and IEMG.