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Warning Signs Flash as Emerging Markets Rally to Records

  • Optimism driven by Biden stimulus plan, dovish hints from Fed
  • Relative strength index for EM stocks signals correction risk
Pandemic Home-Buying Boom Marks Turnaround for Mumbai, One of Asia's Priciest Cities
Photographer: Dhiraj Singh/Bloomberg
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Emerging-market stocks have set a new swath of record highs this week, driven by optimism over additional U.S. stimulus and a dovish Federal Reserve. The rally’s gaining momentum even as some technical indicators are showing a pullback is overdue.

The MSCI Emerging Markets Index has now gained more than 9% this year, extending a rebound from its low during the coronavirus sell-off in March to a heady 88%. Goldman Sachs Group Inc., UBS Global Wealth Management and Wells Fargo Investment Institute all added to the positive chorus this week, releasing bullish calls on developing-nation equities.