Saturday, October 1, 2022

Emerging Markets And Junk Bonds Ex-U.S. Led Last Week’s Gains


Shares and bonds in emerging markets, along with high-yield bonds ex-US, led returns for the major asset classes last week, based on a set of ETFs. Buoyed by a weak index, which is close to a 2-1/2 low, foreign markets generally led trading action for the week through Friday, Oct. 23.

Vanguard FTSE Emerging Markets Shares (NYSE:) led the gainers with a 1.4% increase. The rise lifted VWO to its highest close since early 2018.

VWO Weekly Chart

Notably, the third-best performer last week was the fixed-income counterpart to VWO. VanEck Vectors J.P. Morgan EM Local Currency Bond (NYSE:) added 1.1%. The fund is still below its pre-pandemic peak, but the latest rise shows that the ETF has regained most of its coronavirus-crash loss in the spring.

Barron’s notes that:

“after underperforming the US for a decade, emerging markets face an improving backdrop. More fiscal stimulus and a global recovery from the pandemic, along with a weaker dollar that makes foreign assets cheaper for US investors, should help emerging markets over the next year, says Mona Mahajan, strategist at Allianz Global Investors.”

Last week’s biggest loser: US real estate investment trusts (REITs). Vanguard Real Estate Index Fund (NYSE:) shed 0.6%. The decline marks the fund’s second weekly loss. The fund continues to trading in a range that leaves the ETF well below its pre-pandemic peak.

The Global Markets Index (GMI.F) was fractionally lower last week. This unmanaged benchmark, which holds all the major asset classes (except cash) in market-value weights via ETFs, dipped slightly for a second week.

GMI ETFs 1 Week Returns

GMI ETFs 1 Week Returns

US equities continue to lead for one-year results. Vanguard Total Stock Market Index Fund (NYSE:) is up 18.2% vs. the year-ago level after factoring in distributions. The gain reflects a wide lead over the rest of the field. The second-best one-year performer: emerging markets stocks via VWO, which is up 12.0% over the past 12 months.

Notably, US and foreign property shares are the bottom performers for the one-year window. Vanguard Global ex-U.S. Real Estate Index (NASDAQ:) is down 14.2% vs. the year-ago price. VNQ is off 12.5% for the past year.

GMI.F is up a solid 10.6% for the trailing one-year period.

GMI ETFs 1 Year Returns

GMI ETFs 1 Year Returns

For current drawdown, note that broadly defined commodities (), along with US and foreign real estate shares (VNQ and VNQI) are currently posting relatively steep peak-to-trough declines relative to their median drawdowns since 2012.

GMI Current Drawdowns Box Plot

GMI Current Drawdowns Box Plot

Source link


Please enter your comment!
Please enter your name here



Related Stories