Why Emerging Market ETFs Have Been So Resilient

Despite the number of potential risks associated with the developing economies, emerging markets and related exchange traded funds have been able to maintain their momentum and may still have legs to run.

Year-to-date, the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) and the iShares MSCI Emerging Markets ETF (NYSEArca: EEM), the two largest emerging markets exchange traded funds by assets, gained 13.3% and 14.8%, respectively, heading toward one of their best annual start in at least a decade.

While the developing economies are known for their greater risk-exposure, emerging markets have more or less shaken off the concerns and continue to press forward unabated. For instance, some of the largest gains this year are coming from countries going through political uncertainty as investors consider the net positives over the long haul, according to Bloomberg.

Meanwhile, developed markets are not without their political risks either as traders come to understand a hard-to-predict Trump administration and the rising populist movements during an election year across Europe. All of a sudden,individual country’s political risk may no longer be as great of a concern.

“Geopolitical risk is not just an emerging-market phenomenon at the moment,” said Simon Quijano-Evans, a strategist at Legal & General Investments Management Ltd., told Bloomberg.