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The iShares Core MSCI Emerging Markets ETF ticks all the boxes if you want exposure to emerging markets. There are some potential positive catalysts on the horizon in 2024. Risks remain, but are reducing.
The meeting between Biden and Xi Jinping contributes to easing some investor fears, which in turn benefits emerging markets. A weak dollar could sustain an upside for iShares Core MSCI Emerging Markets ETF. However, geopolitical tensions and economic challenges pose risks to IEMG's holdings and sustainability of upside.
Emerging Market currencies have rebounded, boosting the iShares J.P. Morgan USD Emerging Markets Bond ETF and iShares Core MSCI Emerging Markets ETF. IEMG is a large ETF with an attractive valuation and low cost, making it a good choice for long-term investors. The technical setup for IEMG remains lackluster, and improvement in the chart and price trend is needed for an upgrade.
While developed U.S. and non-U.S. markets indexes were up year to date through October 20, emerging markets benchmarks were treading water. The two largest emerging markets ETFs are the Vanguard FTSE Emerging Markets (VWO) and the iShares Core MSCI Emerging Markets (IEMG).
Hartford Funds launched its Hartford Multifactor Emerging Markets ETF (ROAM) back in 2015. The multifactor fund tracks an index that targets emerging market stocks based on certain factor exposures while also seeking to reduce volatility by 15%.
Emerging markets have been disappointing in the past decade, but there is potential for a turnaround due to cheap valuations and underinvestment. iShares Core MSCI Emerging Markets ETF is a good option for investors looking to diversify internationally, with its broad range of emerging market companies and low cost. The IEMG ETF has a lower expense ratio, tracks large, mid, and small-cap companies, and has a higher ESG score compared to its peers, making it stand out among other emerging market ETFs.
According to S&P Global Manufacturing PMI data, output growth across emerging economies excluding mainland China recorded its strongest quarterly average for 12 years in the second quarter of 2023. Monetary policy makers in emerging markets were far more pro-active in raising interest rates early to combat rising inflation than their peers in the advanced economies.
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Emerging markets generally have more risk than developed markets. However, there's a lot of variation in returns among funds representing the space, including the multifactor funds.
Emerging markets have struggled on a relative basis in 2023, and I reiterate my hold rating. IEMG is a low-cost option for long-term investors seeking exposure to emerging market equities, with its 0.09% expense ratio and a forward P/E ratio of 12. Despite attractive valuations, weak momentum and soft technical trends present headwinds for the fund, especially with the often-volatile Q3 on the doorstep.