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Emerging markets decline toward hibernation

Emerging market equities, as represented by the MSCI Emerging Markets index, declined further toward a bear market in the early days of September. The index’s most recent peak was reached in late January and has since fallen 19.7% as of Thursday afternoon, inching closer to the 20% threshold.

Much of the decline has been driven by the volatile trade situation that has developed between the U.S. and China. Chinese equities, which represent about 30% of the index, have declined about 23% since the start of 2018 while South Korean equities, 15% of the index, are down 10% year-to-date.

While the index hasn’t yet crossed the 20% threshold, it took 158 days to get from its last peak to its current level. The last time emerging market equities fell into a bear market was on Jan. 21, 2008, when it took 60 days to fall 20%. That period was, of course, in the early days of the Great Recession, when the index eventually fell 66% from its prior peak in late October of 2008.