After years of outperforming the U.S. market, emerging markets, as measured by the SCI Emerging Markets index, topped out last October, moving downward in fits and starts since then.
“International markets have recently been under pressure from tighter lending standards, large collateralized debt obligation-driven bank write downs, record commodity prices, and fears of slowing exports to the United States,” says Alec Young, international equity strategist for Standard & Poor’s.
For managers of emerging markets mutual funds, who must, by mandate, invest in such markets, taking steps to protect against the downturn means moving out of aggressive sectors and into more defensive sectors, and also rejiggering which emerging markets are emphasized.