Emerging markets and related exchange traded funds faltered on increased speculation that the Federal Reserve may still hike interest rates later this year.
Developing market stocks have been this year’s comeback kid, with the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) and the iShares MSCI Emerging Markets ETF (NYSEArca: EEM), the two largest emerging market ETFs by assets,up 18.2% and 17.7% year-to-date, respectively.
However, VWO dropped 1.2% and EEM fell 1.4% on Monday after comments from Fed Vice Chairman Stanley Fischer added to rate hike speculations. Fischer said the economy is close to meeting the central bank’s goals and that growth will pick up, Bloomberg reports.
“High-yielding currencies like the rand and the lira are under pressure,” Guillaume Tresca, a senior strategist at Credit Agricole CIB, told Bloomberg. “Markets are getting a good reminder that the Fed is still on course to do something. Emerging markets will remain on a back foot until Yellen’s speech.”
Fed Chair Janet Yellen is expected to make a speech Friday in Jackson Hole, Wyoming.
Fischer’s statement followed San Francisco Fed President John William hinting last week that the September meeting is “in play” for a rate move.[related_stories]