The fundamental basis for the emerging market stock rally
Emerging markets (EMs) have had a glorious 2017 so far, with the MSCI Emerging Markets Index up 29% year to date, easily surpassing the MSCI World Index’s 18% year-to-date rise. The big question is: does the EM stock rally have a strong basis in the real economy?
To answer that question, cast your eyes on the accompanying chart, which shows the positive relationship between trade growth in EMs and growth in the MSCI EM index. Notice how EM stocks have perked up since March this year as trade growth rebounded.
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