As Emerging Markets Struggle, Two Countries Make Their Claim

As tariffs, sanctions, and politics continue to coalesce into a shadow of uncertainty hanging overhead, the markets haven’t blinked—at least not the US markets. The S&P 500 Index is hovering around all-time highs, and the Q2 earnings season was a rousing success across the board.

But that strength hasn’t spread across the globe. A myriad of headlines, Brexit ramifications, crisis in Turkey and Venezuela to name a few, have weighed heavily on the global markets.

Take a look at the Direxion Daily MSCI Emerging Markets Bull 3X Shares ETF EDC, the triple-leveraged bullish ETF for the emerging markets. It’s down 22 percent in the last three months as of this writing, as its counterpart, the Direxion Daily MSCI Emerging Markets Bear 3X Shares ETF EDZ, is trading flat with four times as many inflows.

Source: Yahoo Finance

But while the emerging markets as a whole have struggled to find their way in 2018, other country-specific emerging market funds have quietly risen higher.

After bottoming out at the end of June to a low of about $68, the Direxion Daily MSCI India Bull 3X Shares INDL has since rallied back 26 percent in the succeeding 8 weeks.

India

The recent surge stems from a few causes, including ongoing negotiations with the U.S. after postponing some retaliatory tariffs and a drop in cost of crude; a commodity that India is also increasingly turning to America for in the face of new sanctions on Iranian oil. However, what’s truly driven price action in the MSCI India Index (NDEUSIA) is a rash of stellar financial reports from the country’s leading public sector banks and energy companies, bolstering some of the index’s largest holdings in those industries.

Mexico

Since the election of incoming social democrat president Andres Manuel Lopez Obrador, Mexico’s broad market index has skyrocketed by 40 percent, and the Direxion Daily MSCI Mexico Bull 3X Shares ETF MEXX has rallied 53 percent.

Part of this enthusiasm for the new administration is a seeming fondness developing between President-elect Obrador and U.S. President Donald Trump, something that, as of Monday, has resulted in an overhaul of NAFTA for the two nations.

Other than signs of a blooming presidential friendship and a stable, though not stellar, economy, Mexico has actually not had strong catalysts supporting some of the enthusiasm that struck its market following the July first election results. And, with the real risk of President Trump instating tariffs on auto imports in his hard-line approach to trade negotiations and Obrador’s reluctance to open up the country’s oil industry to private investment, traders eyeing a broad Mexico index should stay abreast of the country’s diminished, 2 percent growth outlook for coming quarters.