EM equities staging a small comeback versus the SPX in the last couple weeks but only up small off the relative value trend lows of Black Monday.  In the last 5 years EM has underperformed the US index by 55% in USD terms.

Emerging marketsAnd the Dollar is a major part of the opportunity for EM.  While its clear there are factors that should keep the US currency well bid against the rest of the world, trends since recent the Fed statement tell me that EM is embracing what everyone has been saying will knock EM down further: US tightening.  EM currencies are rallying in the face of Fed normalization despite clear macro challenges locally in many EM countries.  Note EMs rally in the last six weeks has come with the USD strength which is supposed to have been EMs death star.

Chart_ EEM

The key currencies to watch across EM are clearly the Brazilian Real, as well as the South African Rand, and the Turkish Lira.   Some interesting price action is afoot: yesterday the Brazilian Real traded through the 50dma for the first time in a strengthening trend since June.  We are watching a move to the 100dma which has been the key area of resistance back to four different tests back last Fall's start of the major selloff in the currency from 2.20 to eventual 4.20 level hit 6 weeks ago.  Since that point the Real has been storming back with higher real rates in BZ and a commitment to combat inflation despite the broader political circus.




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