Continuing Strength

 
U.S. markets, as represented by the S&P 500, have been strengthening since the middle of February, and the S&P has now climbed back atop its 200-day moving average. This is a positive development, and provides a constructive backdrop for the fortunes of emerging markets ADRs. The Fed's back-down from a projected four rate increases this year to just two was welcome news to investors, and has definitely reduced tension in many minds.

The tone of emerging markets stocks has also improved, as both the iShares MSCI Emerging Markets ETF (EEM) and the Golden Dragon China ETF (PGJ) have accelerated their rates of advance. While we have yet to see either ETF regain its 200-day moving average, this new strength from Chinese stocks is a positive sign that investors are willing to take on a bit more risk and are looking to EM stocks for opportunities.

Earnings season for emerging market stocks is always a long process, as looser reporting requirements allow companies extra time to release their results. We now have reporting dates for two more of our stocks.

The major indexes were all down during the morning session, but rallied in the afternoon to finish the day up less than a percent each. The Dow was strongest, rising 155 points (0.90%), the S&P 500 gained 13 points (0.66%), and the Nasdaq rose 11 points (0.23%). The iShares MSCI Emerging Markets ETF (EEM) enjoyed a strong day, gaining 73 cents (2.20%) to finish at 33.85.


This is an excerpt from Cabot Emerging Markets Investor, which seeks to capitalize on the enormous potential in emerging market countries. Chief Analyst Paul Goodwin has been a researcher and writer for over 30 years and a member of the Cabot investment team since 2005.

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Paul Goodwin can be found on Google Plus.

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