After a breakout first half in 2019, Emerging Market equities ($EEM as a proxy) have begun to loose some steam.
Since February, Emerging Market stocks have been treading water, in relation to their US equity counterparts, trading in an established range of $44-$40 since then.
On a technical basis, $EEM weekly chart is showing that Emerging Market stocks are not in trend at the moment, with its ADX below 20, and an RSI remaining flat since June 1st, despite the increase in momentum in late May.
On a fundamental basis, despite their cheap valuations relative to their Developed Market peers, and accomadative global central bank policies, Emerging Market stocks seem to still be weighed down by economic weakness in China, the US-China trade war, weak global PMIs, and the overall slowdown in global growth.
Going forward, we see this trend persisting over the next few weeks and months, unless there is a positive shock to the global economy and financial markets.
For investors who are adventurous, we recommend investors to drill down within Emerging Market stocks and be selective on a regional and sectoral/industry basis. Additionally, investors should take a look at Frontier Markets ($FM as a proxy), which has performed much better year-to-date in relation to their Emerging Market peers.