Both the emerging market and Brazilian market exchange traded funds that are used to price the CBOE Emerging Markets ETF Volatility Index (VXEEM – 20.25) and CBOE Brazil ETF Volatility Index (VXEWZ – 23.00) were lower last week. The iShares MSCI Emerging Markets ETF (EEM – 39.79) was down 1.19% and the iShares MSCI Brazil Capped ETF (EWZ – 42.21) was down 1.12%. Emerging markets had a tough time in 2013 and 2014 doesn’t look so hot with EEM losing 4.8% and EWZ down 5.5% for 2014 already.
In the volatility world, the reaction to this weakness has been a yawner. Last week VXEEM dropped over 8% and VXEWZ was down 6.66% (why does that bother me?). The futures markets shifted pretty well in line with these drops. Do note that lower volatility tends to be an indication of bullishness for the underlying markets. Maybe 2014 isn’t going to end as badly as it has begun.