This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Goodbye 'Fragile 5', Hello 'Great Convergence'

NEW YORK (TheStreet) -- If you are an investor and are not familiar with term "Fragile 5," consider yourself lucky. The term was invented last August but resurfaced early this February as emerging markets were down more than 10% on the year.

There was a flurry of headlines at the time about "The Fragile 5," and every major financial news channel had a special on these five Emerging Market countries that were supposedly in a "crisis."

This negativity drove retail and professional investors to capitulate and sell their remaining emerging-market holdings. As such, we saw record outflows from emerging-market equity funds at the February low, and professional money managers were reporting a record underweight in their emerging-market holdings.

Fast forward two months and what has transpired is a classic example of how wrong the crowd can be at extremes. These five countries -- Brazil, India, Indonesia, Turkey, and South Africa -- have all posted substantial rallies since their February lows and are now up on the year (see chart below). So much for fragility.

Even more surprising to many would be that four out of five of these countries are outperforming the Russell 2000 (IWM) this year. Additionally, emerging-market credit as measured by the iShares JPMorgan USD Emerging Market Bond Fund (EMB) is actually outperforming U.S. credit as measured by the iShares iBoxx High Yield Corporate Bond Fund (HYG). This is important as credit typically leads and any remaining notion of an ongoing crisis in emerging markets should be dispelled as their credit markets are outperforming our own.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
EMB $113.37 -0.13%
EEM $42.70 -1.75%
AAPL $124.75 -1.13%
FB $80.78 -1.86%
GOOG $524.05 -1.83%


DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs