Emerging market stocks have taken it on the chin so far in 2018, down 9% and unperperforming the MSCI World Index by about 8%. There are of course plenty of excuses for such bad performance, from trade related issues to the breakdown of the synchronized global growth story. Even still, plenty of market-based indicators suggest the damage done to EM stocks has been a bit overdone. Below we briefly hit on five of them.

First, oil is basically at its high of the year. Oil and emerging market relative equity performance is highly related. Oil is of course one barometer of global liquidity conditions, just like EM stocks. Oil is also a good barometer of global growth. Besides that, many EM countries export oil, meaning that when oil prices rise, those countries make more money. That is why oil prices and EM stocks almost always move with each other.

Second, global shipping rates are just about at cycle highs, which is inconsistent with new lows in EM equity relative performance. Traditionally, the Baltic Dry Index and EM relative performance go hand in hand, even if the correlation isn’t perfect, because shipping rates are an indicator of both growth and liquidity, just like EM stocks.