Emerging Markets During the Financial Crisis
True or False: During the 2007 financial crisis emerging market funds outperformed U.S. large Cap funds?
Answer: False:
Evidence: The chart below compares peak price in 2007 prior to stock market collapse and trough price in 2009 prior to the recovery. The peak price for VLACX was on October 1, 2007. The peak price of VWO, the largest emerging market fund, occurred a bit later, on October 22, 2007. The trough price for both funds was realized on March 2, 2009.
| U.S. Large Cap versus Emerging Market During the Financial Crisis | |||
| Funds | Peak Before Crash in October 2007 | Trough at End of Crash in March 2009 | % Decline |
| VLACX U.S. Large Cap | 28.1 | 12.6 | 55.3% |
| VWO Emerging Markets | 57.5 | 19.0 | 67.0% |
The collapse in the Vanguard emerging market fund was larger than the collapse in the Vanguard large-cap U.S. equity market.
Perhaps some other emerging market fund did better but I doubt it.