The MSCI Emerging Markets ETF (EEM) has been surging over the last week after it broke out above its fall trading range. Don't look now, but EEM is now outperforming the S&P 500-tracking SPY ETF in 2012. EEM is currently up 14.07% year to date versus a YTD gain of 14.02% for SPY.
As shown in the second chart below, emerging markets got off to a great start to the year but then fell apart during the eurozone crisis in the spring and early summer. As emerging markets faded in the middle part of the year, the US held up relatively well. In the fourth quarter, however, we've seen the US struggle while emerging markets have soared.
With just 5 basis points separating the two in terms of year-to-date performance, it's going to be a race to the finish line over the next two weeks.