Emerging markets continue to underperform the S&P 500 this year. The funny thing is you would not know this from looking at the volatility indexes associated with EEM (Emerging Market) and EWZ Brazilian Market) exchange trade funds. I have been asked about this disconnect and my theory is the lack of volatility in the US Markets (think low VIX) is influencing the levels of VXEEM and VXEWZ.
Last week both ETFs did rise a bit and VXEEM reacted as expected. VXEWZ can be a head scratcher at times and last week was one of those times. The index was slightly higher and all the futures contracts dropped slightly. One of the excuses for this sort of action was that EWZ managed to cross below its 200 day moving average this past week.