Emerging-Market ETFs Vulnerable to Fed Policy Changes

Developing-nation securities are likely to slide on any signs Fed will tighten
Data: Bloomberg; graphic by Bloomberg Businessweek

If a rebound in U.S. inflation prompts the Federal Reserve to chip away at its wall of money sooner and faster than expected, then the rally that boosted returns in developing-nation stocks, bonds and currencies since January 2016 will be under threat. A key beneficiary of central-bank stimulus, exchange-traded funds are among the most-owned assets in the world today. The securities are bound to the fortunes of their underlying indexes and investors can do little to hedge against changing dynamics.

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