EM vs US Dollar is the biggest story of the spring

In the middle of February, I said “Tell me when the dollar rally ends, I’ll tell you when EM starts working again.

I showed the below chart, in which you can see emerging markets underperformance vs the S&P 500 in the top pane, with the US dollar index in the bottom – a perfect inverse correlation:


To me, the single biggest story of the spring is the reversal of the prior trend, which began almost the exact day of my post.

Below, I bring my chart up to the present:

eem 2

The big question is now whether or not it’s a counter-trend move destined to fizzle or the start of something new.

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