Chart of the Day - Thursday, December 10th, 2020

Today’s Chart of the Day was shared on Twitter by Adaptiv (@adaptiv). It's a ratio chart of Emerging Markets vs. the S&P 500 over the past 2.5 years ($EEM/$SPX). Emerging Markets have persistently underperformed the S&P 500 over the past decade. The group never fully recovered from the Financial Crisis, seeing as $EEM hasn't printed an all-time high since 2007. However, things could get interesting for Emerging Markets in 2021 and beyond. On an absolute basis, $EEM is approaching the 2007 highs. On a relative basis, $EEM has already broken out from a multi-year downtrend and is now breaking out from a large base. In other words, $EEM has begun to outperform the S&P 500 in recent months. In a comment to The Chart Report, David Zarling at Adaptiv said, "Latin American stocks are showing themselves to be the strongest of the Emerging Market groups, along with India. Both those areas are also making new relative highs. It also doesn't hurt that we continue to see dollar weakness across a majority of foreign currencies. This environment creates a tailwind for this trend to continue."