Emerging markets equities and the related ETFs were darling assets in 2017 as investors scoured the globe for value outside the U.S. That theme is continuing in 2018 as investors flock to ETFs such as the iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG).
IEMG debuted just over five years ago as the low-cost alternative to the iShares MSCI Emerging Markets ETF (NYSEArca: EEM). With investors increasingly prioritizing fees in the ETF evaluation process, IEMG’s status as a cost-effective avenue to emerging markets stocks has helped the fund grow at a blistering pace. To start 2018, IEMG and EEM are among the top 10 asset-gathering ETFs.
Emerging markets are enjoying improved fundamentals thanks to corporate earnings improving as economic growth rebounds and strengthening currencies against the U.S. dollar on the back of improved economic outlooks.
“The benchmark MSCI Emerging Markets Index has made the best start in six years, coming within hailing distance of a record. Market capitalization has never been higher, at $20 trillion. Volatility is less than half of what it was in 2016, and earnings estimates have grown by more than a third,” according to Bloomberg.
Market watchers continue to see the the Fed and President Trump policy moves as key drivers in the direction of emerging market assets. The Fed would affect monetary policy changes that could strengthen the U.S. dollar or weaken the appeal of emerging market currencies. Furthermore, Trump has voiced protectionist rhetoric that could affect the way the U.S. does business with its global peers.