This Week in Emerging Market Volatility – 1/10/2014

So far in 2014 the S&P 500 is down about 0.03% which has resulted in lower expected volatility for the US market.  Last year emerging markets lagged the US markets in what can only be called a staggering amount.  Well although we are only ten days into 2014, emerging markets do not appear to be breaking from the trend in 2013.  The iShares MSCI Emerging Markets ETF (EEM – 40.27) is down about 3.7%.  A market that really lagged the S&P 500 last year was Brazil and the iShares MSCI Brazil Capped ETF (EWZ – 42.69) is already off by about 4.5%.

The underlying volatility indexes for EEM and EWZ do not appear to be signaling too much concern that this sort of price behavior is going to continue for all of 2014.  Both VXEEM and VXEWZ dropped last week in the wake of basically mixed index performance.   This time last year pundits were calling for strong emerging market performance and they were wrong.  This year the outlook seems to be very bearish for emerging markets if you read pundit forecasts.  So far VXEEM and VXEWZ may disagree a bit.