Equities here in the US have gotten off to a weak start this month with the S&P 500 (SPY) down modestly over the past couple of sessions. However, those declines are being overshadowed by emerging markets. As we discussed in yesterday's Morning Lineup and Closer and expanded on further in today's Chart of the Day, Mexican equities have gotten massacred following the country's election of Claudia Sheinbaum as president. The US-traded ETF that tracks Mexican stocks (EWW) is down 8.3% month-to-date and 12.3% year-to-date. After that decline, the ETF closed yesterday at a record 4.19 standard deviations below its 50-day moving average (DMA). That recent weakness is also a 180 from last year when EWW was the best-performing country ETF of the 22 tracked in our Global Macro Dashboard.

Turning forward to today's news, Indian equities are likewise responding negatively to an election. As we detailed in today's Morning Lineup, Prime Minister Narendra Modi's Bharatiya Janata Party (BJP) and its allies won a majority, but by a much smaller margin than was expected just yesterday. Given the results, the India ETF (INDA) is down 6.6% for its worst day since the final day of 2021. Unlike EWW, INDA is still up on the year, though it has swung from deeply overbought to oversold territory in only a day.

As for the rest of the world, we would note that yet another emerging market has fallen on hard times. Brazil (EWZ) has gotten crushed this year with a 16.7% year-to-date decline even outpacing Mexico for the worst performance in 2024. Averaging across countries, EMs have fallen 0.74% year-to-date whereas developed markets are up mid-single digits on average. Relative to prior highs, the gap between emerging and developed markets is even more stark.EM country ETFs currently sit an average of 9.42% below 52-week highs compared to only 3.28% for developed market countries.

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Below, we show price charts of a handful of emerging market economies over the past year with 50-DMA trading ranges shown. As noted earlier, Brazil has been weak and trending lower all year consistently trading below its 50-DMA (gray line). It is not only extremely oversold today, but it is also on the verge of 52-week lows. While EWZ has been trending lower, China (MCHI) has been a bright spot. MCHI is in a long-term downtrend dating back to early 2021, but since the start of this year, it has rebounded. This week's weakness in Mexico (EWW) comes on what has been a period of consolidation. Since the end of last year, EWW has essentially trended sideways, and current levels are in the middle of last fall's range. As for India, up until today the country's equities have been in a steady uptrend throughout the past year. After today's decline, the uptrend has taken a hit with the first oversold readings since the fall.

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