The MSCI Emerging Markets Index is at its highest level since early 2018, and only a stone’s throw from the all-time high set in 2007.

Since the onset of the global financial crisis more than a decade ago, American investors have not been rewarded for geographic diversification. Both international developed and emerging market equities have failed to fully recover their pre-crisis levels, let alone match the returns of U.S. stocks. Market watchers during the mid-2000s might find that hard to believe, and understandably so – EM stocks dominated that era, returning 38% per year from the October 2002 to the 2007 peak. But they’ve gone nowhere since.

A breakout from this decade-long consolidation could be the catalyst to help international stocks outperform once again, but first they’ll need to absorb whatever overhead supply remains. Let’s take a closer look.

January 2018 was the last time EM made a serious attempt to reach new highs. The year prior was marked by synchronized global growth and broad-based gains in global equity prices, but it was followed by 2 years of trade-war uncertainty. As geopolitical tensions eased in December 2019, the index broke above resistance and looked poised for more gains. Then a global pandemic struck. The ensuing lockdowns proved more impactful than the trade troubles, as the index broke through multi-year lows. But before March ended, the bottom was in, and now, the index is back above January’s pre-COVID levels.

Only the 2018 highs stand between current prices and the all-time peak. Multi-year support lies just below, and momentum is strong. RSI is holding up near overbought territory and has failed to get oversold on any selloff since the March trough, both signs of strength. We may not see the breakout before the end of the year – we may not see it ever – but perhaps after 13 years, we’ve waited long enough.

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