The iShares MSCI Emerging Markets ETF (EEM) was up about a half percent last week despite the performance of the Brazilian market. We shall get to Brazil in a moment. EEM is down down 0.03 for the year for a loss of 0.07% which is close enough to say flat on the year. The result of the relatively quiet week for EEM was a quiet week for VXEEM which managed to drop 0.20 or about 1% to finish the week at 18.55.
The Brazilian market continues to be an adventure. For a couple of months it was all about the national election, not it is about the future of the Brazilian economy which appears shaky. The result of uncertainty is always higher implied volatility and that’s where VXEWZ is – high.
The curves tell two different stories as well. VXEEM depicts sanity and smooth sailing ahead. VXEWZ, continues to be in backwardation which means uncertainty about what is next for Brazilian stock prices continues to prevail.