Global stocks: U.S. in, Emerging Markets out. The stronger U.S. economic data...and concern about Chinese authorities putting the brakes on growth in China...is causing a change in investor sentiment.
I noted earlier on the air that the markets have an odd, somewhat schizophrenic, tone this morning. On one hand, there are several sectors up that would suggest "risk on": iShares Dow Transports (IYT), Home Construction (ITB), WisdomTree Japan Hedged Equity (DXJ), and PowerShares Aerospace (PPA).
On the other hand, many of the traditional "risk on" countries and sectors are down today: Market Vectors Steel (SLX), iShares China (FXI), Global X Copper Miners (COPX), Australia (EWA) and South Africa (EZA) ETFs.
What's up? It's the continuation of a trend that has been evident for several weeks:
- Traders are seeing an improving U.S. economy...one that is outperforming much of the rest of the world, and starting to invest that way.
- At the same time, concerns that China may be trying to reign in real estate and nascent inflation is causing "risk-off" behavior in China investments and, to some degree, commodity funds.
Don't get me wrong: no one is abandoning emerging markets. But the S&P 500 is up almost nine percent this year, while the iShares Emerging Markets Index (EEM) is down three percent, and the gap has been accelerating since February and again in the last few days.
It's not just price drops: since Feb. 1, there have been outflows of $1.7 billion from the EEM, while there have been huge inflows into U.S.-based stock ETFs like the SPDR S&P 500 (SPY).
And it's not just China: other emerging market countries like Brazil, Malaysia, Mexico, and India have also been weaker since February.
—By CNBC's Bob Pisani