The MSCI Emerging Markets Index is higher by 9.64% YTD, easily outpacing the returns offered by the S&P 500. There’s still seven months left in 2025. But it’s clear emerging market equities have found some solid footing since the start of the year.
Should that trend continue, market participants could be compelled to revisit ETFs dedicated to developing economies. That includes the ALPS Emerging Sector Dividend Dogs ETF (EDOG ). This fund has been an admirable 2025 performer in its own right. That’s an impressive feat when considering it’s heavily allocated to defensive sectors. Those sectors include consumer staples and utilities.
That composition makes EDOG’s 2025 sturdiness all the more noteworthy. That’s because growth stocks have been among the primary drivers of emerging markets’ resurgence. What EDOG lacks in sector-level glamour, it makes up for in terms of equity income. The ETF, which tracks the S-Network Emerging Sector Dividend Dogs Index, sports a trailing 12-month dividend yield of 6.81%. That’s well in excess of what investors find on plain-vanilla emerging markets benchmarks.
EDOG May Have Tailwinds
Further momentum could be in store for emerging stocks and ETFs like EDOG. And that’s particularly so if trade tensions between the U.S. and developing markets ease.
“While certain EM Asian countries such as Vietnam remain vulnerable to reciprocal tariffs after the 90-day pause, especially if the U.S. targets transshipments, others are more insulated. India stands out given positive trade discussions and domestically-oriented economy,” noted Marina Valentini of J.P. Morgan Asset Management. “As tariff uncertainty fades, investors may refocus on India’s growth story, fueled by favorable demographics, reforms and friendshoring. Latin America has been mostly spared from reciprocal tariffs, including Mexico as it renegotiates the USMCA.”
EDOG allocates 9.31% of its portfolio to India stocks. Four Latin American economies — Brazil, Mexico, Colombia and Chile — combine for nearly a quarter of the fund’s roster.
Another potential perk for EDOG is the weakening dollar. One of the primary reasons emerging market stocks lagged going back to 2010 was the greenback was largely strong then. That’s changing this year. And it’s already proving to be a catalyst for emerging markets assets. Add to that, the asset class remains under-owned. That’s likely the result of it underperforming for more than a decade.
“EM remains under-owned, with its global AUM share dropping to 5% from 8% in 2017, and stands to benefit from powerful rotation trades from past winners to less favored markets. Leadership has also shifted within EM – from regions with stellar returns in 2022-24, like Taiwan and India, to laggards such as Korea and LATAM,” concluded Valentini.
VettaFi LLC (“VettaFi”) is the index administrator and calculation agent for EDOG, for which it receives a fee. However, EDOG is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of EDOG.
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