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No small number of analysts have noted a rising correlation between some of the more speculative asset classes, including foreign currencies, gold, oil and other commodities, and certain sectors of the global equity markets.
As far as stocks go, however, one relationship may be worth paying special attention to. That is, the apparent link between the technology-laden Nasdaq-100 index -- which has an equivalent exchange-traded fund, the Powershares QQQ Trust ETF (AMEX: QQQQ) -- and the MSCI Emerging Markets Index, which also has an equivalent exchange-traded fund, the iShares MSCI Emerging Markets Index ETF (AMEX: EEM).
Based on how the two indices have tracked each other over the past year or so, it seems that when one zigs or zags, the other soon follows. Of course, the relationship may be more coincidental than causal and price movements could eventually fall out of line, but that doesn't necessarily mean investors should dismiss it out of hand.
Under the circumstances, this week's sharp break in the Nasdaq-100 index, which has been exacerbated in large measure by disappointing results from Cisco Systems Inc. (NASDAQ: CSCO) and QUALCOMM Inc. (NASDAQ: QCOM), could also be a warning sign for investors who've been piling in to the stock markets of lesser-developed nations amid a falling dollar and the expectation of continuing strong growth overseas.
In other words, the fact that investors are beginning to pare down their exposure to Nasdaq stocks, may also mean that it's time to take some money off the table in markets like China, Brazil, India and Russia.
Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle.
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