We have written extensively in recent weeks about the correlation between crude oil and stock markets. Our key finding was that, starting August 2014, stock markets sold off each time crude oil fell +10% in two trading weeks.
Our finding was based on an analysis between crude and the S&P 500. Now we extend that analysis to emerging markets.
As the chart shows, crude has literally dragged down emerging markets throughout 2015, after it started its 2nd phase of its collapse.
With the outlook of a long term bottom in crude, we believe that emerging markets has a great outlook. However, not every emerging market can be bought, as there has been quite some (technical) damage in several of those countries. Our favorite, without any doubt, is India, which, as explained in this article has a rare combination of a very high real GDP growth (approx. 7% in 2015) and a great looking chart pattern.
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