This Week in Emerging Market Volatility – 3/14/2014

The emerging markets continue to be confronted with issues that block any sort of bullish run and many of these issues are out of the control of the impacted country.  Fed tapering was a big deal and now unrest in Ukraine is getting in the way.  Whatever the reason the emerging market sector is having a tough 2014 and last week did not make things better.  The iShares MSCI Emerging Markets ETF (EEM – 38.40) lost almost 3% last week and is now down a little over 8% in 2014.  Brazil fared no better also losing about 3% on the week which places the iShares MSCI Brazil Capped ETF (EWZ – 39.11) down 12.5% for 2014.


I keep thinking the bottom is in for the 2014 World Cup and 2016 Summer Olympics, but then another bump in the road comes along.  VXEWZ closed at the highest level since July 13, 2013 this week.   I faintly remember a bullish run from EWZ during the second half of last year and did some digging with the result being the chart above.  August of last year was the last time we had VXEWZ in the low 30’s and after having chopped around for a while this was the beginning of a short lived rally of about 20% for EWZ.  Time will tell if history repeats itself.  Of course you never know who is going to take actions to put more worry into the markets, but for now the nervous factor for Brazil is priced in.