Are These Stocks Acting Like It's the Late 1990s?

By Michael A. Gayed  MAR 04, 2014 3:24 PM

From the Buzz & Banter: While they have recently underperformed, emerging market stocks likely will rebound strongly.

 


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There has been a stunning successive move in US small-caps over the last 19 trading days, with today in particular being a big gainer. Our Accelerated Time and Capital (ATAC) models used for managing our mutual fund and separate accounts last week noticed improving momentum and positioned into them, which thus far has worked nicely. There may be shades of the late 1990s going on here with the manic behavior high beta stocks in the US are expressing relative to their considerably cheaper emerging market counterparts, as seen with the iShares MSCI Emerging Markets Index ETF (NYSEARCA:EEM). However, the madness of the crowd is a hard thing to counter. I suspect a major reversal could come in the second quarter to undo recent strength, but for now, the music keeps on playing. As to broader emerging stocks markets, a trade will come that will stick. I have no idea when and no idea how, but the more it under performs, the more of a screaming buy it becomes when leadership returns.

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No positions in stocks mentioned.

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