FYI: There’s been a lot going on in emerging markets recently. Whether it’s political drama in South Africa, Malaysian elections, Argentina’s emergency rate hikes and request for IMF assistance, or the ongoing meltdown of the Turkish lira, it’s all a lot to stay on top of. Especially for investors that don’t spend their days in the weeds of EM, how to follow it all? Bespoke has a range of tools that can help.
First, one of the easiest ways to keep track of how things are going is to watch the value of EM currencies (EMFX) versus the dollar. We like to use an index of 20 equally-weighted EM currencies to get a broad feel for how things are going. The absolute level of the index is somewhat arbitrary, but since it captures the performance of a broad range of the asset classes, its trend gives a good feel for how things are going. As shown below, it’s been a pretty rough run of late. We also show the 3 month change in the index, which is useful for comparing how painful periods of stress are; the current selloff is akin to the dollar rally post-election, but not as bad and not as sustained as things were in 2015-2016. Of course, this measures spot only, so it’s only a rough gauge rather than a performance benchmark.
Regards,
Ted
https://www.bespokepremium.com/think-big-blog/keeping-track-of-em/
