Stock exchanges in both developed and emerging markets moved
higher Friday thanks to U.S. Federal Reserve Chairman Ben
Bernanke's speech at Jackson Hole, Wyoming.
[caption id="attachment_32871" align="alignright" width="300"
caption="In long term investments, timing and the moves of Ben
Bernanke are everything."]
Bernanke stated the Fed stands ready to act with additional
monetary easing (aka QE3), and that the Fed zero interest rate
policy (ZIRP) will remain unchanged until at least 2014.
U.S. stock markets reacted positively and spiked higher early on
Friday. Although they closed higher on the day, they closed well
off their intra-day highs. For example the SPDR Dow Jones
Industrial Average ETF Trust (
) illustrated below.
In the chart of DIA above the red line extends from the previous
day's close to the high on Friday. While DIA was up more than 1% at
that point, it gave up a lot of its gains by the close (the green
Comparatively, the iShares Emerging Markets Index ETF (
) fared slightly better than DIA.
Like DIA, the ETF did close lower than its intraday high. But it
closed higher than DIA on a percentage basis, just shy of 1%. Not
all emerging markets performed equally well. The iShares
FTSE/Xinhua China 25 Index ETF (
) closed up only 0.40%.
The WisdomTree India Earnings Fund ETF (
) traded only slightly higher on Friday and ultimately closed up
just $0.03 for the day.
The Morgan Stanley Frontier Emerging Markets Fund (
) performed better than most, closing up approximately 2%.
The interesting and inspiring aspect of this chart is not only
that it closed higher than EEM and the other ETFs profiled here,
but it closed at the high for the day. That is usually a good sign,
at least in the short run. And although FFD did very well on
Friday, not all frontier market ETFs were up 2%.
The Guggenheim Frontier Markets ETF (
) was up only 0.5% on the day. But it also closed at the high for
the day, reinforcing a positive short-term outlook for frontier
These charts show correlation does run high from U.S. stock
indexes to frontier and emerging markets. The
Fed news moved markets higher, but not equally so. For
investors who already believe the best long term growth
rates will be in frontier markets, short term results like these
reinforce that outlook.