For investors in emerging markets, the playbook has been a familiar one for decades: when commodities prices go up, so do emerging market stocks and vice versa.
The logic is simple: the emerging world is where (most) commodities come from. If you are bullish or bearish on global growth, you feel the same about commodities and EM stocks.
But this year the narrative has changed. As a post-coronavirus recovery became visible late last year, both sets of assets surged. Between early November and late January, the S&P GSCI commodity index and the MSCI Emerging Markets equity index each gained about 25 per cent.
Since then, commodity prices have risen another 30 per cent, while EM stocks have flatlined.
One simple explanation is that there is less reason than there used to be for EM stocks and commodities to rise and fall together. The days when the MSCI EM index was dominated by commodity producers in Latin America are long gone. Today,…