Equity markets in the U.S. have notched record after record in 2017, but emerging markets are on pace for a record year of their own.
One popular emerging markets-tracking exchange-traded fund, the iShares MSCI emerging markets ETF (EEM), has rallied 32 percent this year, on pace for its best annual performance since 2009. Its strong performance comes on the heels of a historically weak U.S. dollar relative to rival currencies, and some believe emerging markets could continue thriving.
"There are a lot of reasons to be very bullish on emerging markets right now. Their economies are doing well, a lot of them are commodity-based, and we've seen copper and oil rally back nicely," said Matt Maley, equity strategy at Miller Tabak.
He pointed out that the EEM, top holdings of which are Asian technology giants like Tencent and Alibaba, has held firm even as the dollar index bounced in early September.
Examining a chart of the ETF, Maley said Wednesday on CNBC's "Trading Nation" that the EEM's 50-day moving average has proved "rock-solid support" all year, and he'll be watching that level closely for any indication it's beginning to break down.
Indeed, the EEM has not yet "rolled over" in the face of a strengthening dollar, he said. However, he noted that an emerging markets bond ETF, the EMB, has begun showing weakness as it has begun diverging from the EEM. They typically move in tandem.
A stronger U.S. dollar and higher interest rates in the U.S. typically hurt emerging market equities, as a stronger greenback may appear more attractive to foreign investors. Furthermore, some emerging markets are tethered to dollar-denominated commodities such as oil.
The dollar is unlikely to strengthen substantially from here, which should prove further support for emerging markets, said Gina Sanchez, CEO of Chantico Global.
"We like emerging markets because of the expansion of trade, and the fact that that has yet to make its way into the bottom line in terms of sales," Sanchez said Wednesday on "Trading Nation," adding that sales in many emerging markets' firms are continuing to grow.
Sanchez said even as price-earnings ratios in the space have expanded, much of that has simply been evident in emerging market technology stocks, and she still likes emerging markets.
The EEM fell in Thursday trading.