This Week in Emerging Market Volatility – 7/25/2014

The state of emerging markets is strong. EEM rose 1.4% last week and is up just a tad under 8% for 2014. After the underlying market put up a strong week VXEEM made a surprising move and rose over 5% – I’ll attribute this move up to the index already being pretty low and a couple of economic events coming out next week in the US that could result in extra volatility for all equity markets.


If EEM is strong, then EWZ is the champ! The Brazilian ETF rose over 1.5% last week which puts the total return for 2014 at 16.55%.   Monday EWZ rose and VXEWZ experienced a spike, but by the end of the week VXEWZ had given up all of Monday’s gains. It appears, much to the chagrin of pundits, that Brazil is much more than just soccer.


The VXEEM curve is shifted in a parallel fashion, with the index being followed higher by the actively traded futures. VXEWZ twisted a bit, with a lower index and August future, but a tad higher closes for September and October. The steepness of the curve makes me wonder if EWZ is going to be able to maintain its ‘champ status’ through the end of the year.