Stellar Gains for EM to Start 2016

April 18, 2016 |Author: EGA Investment Strategy | Categories: Chart of the Week, Emerging Markets

Stellar quarterly gains for EM. The MSCI Emerging Markets (EM) Index gained 5.7% in Q1 2016, outperforming the MSCI World Index (-0.2%). After a poor start to the year, EM bounced back strongly in March. A rally in global commodity prices, along with dovish comments from the U.S. Federal Reserve (the Fed) over the trajectory of future interest rate rises and continued monetary easing by central banks in Europe and Japan reinvigorated investors' appetites for risky assets.

Other regional performance. Other regions were far-off from the performance of EM:

The force was not with the S&P 500 Index anymore as it finished a distant second (+1.3%). S&P 500 Index had a disappointing start to the year with the worst 10-day start on record losing 7.9%. In a similar fashion to EM, the S&P 500 Index rebounded in March aided by rising oil prices and a dovish Federal Reserve.
The MSCI Frontier Markets (FM) Index lost 1.0% in Q1 2016, after a huge decline of 14.7% in 2015. The continued concern over slowing global growth convinced investors to shy away from the more politically unstable and less liquid asset class.
The MSCI Europe, Australasia, Far East (EAFE) Index was the worst performer in Q1 2016 with a negative return of -2.9%. EAFE’s poor performance is a result of a combination of factors including deteriorating growth, deflationary pressures, a lack of reforms in Europe’s banking system, concerns over a potential British exit from the European Union, and signs that monetary policy may be reaching its limits as the European Central Bank (ECB) nudged interest rates further into negative territory.

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