Moat ETF performance vulnerable to Treasury yields

What happened: The JPMorgan Equity Premium Income ETF (JEPI) outperformed the broader market in 2022, falling only 3% compared to the Vanguard S&P 500 ETF's 18% loss, due to its focus on low volatility stocks. Conversely, the Fidelity Fundamental Emerging Markets ETF (FFEM) dropped 13% in a single month, despite a 34% gain over the past year, as rising Treasury yields drained emerging markets.

Market impact: This divergence highlights the vulnerability of high-yield and emerging market ETFs to rising Treasury yields. While JEPI's low volatility strategy protected it during the 2022 bear market, FFEM's exposure to high-growth, but often higher-risk, emerging markets left it susceptible to yield-driven sell-offs.

What to watch next: Investors should monitor the 10-year Treasury yield, which has been driving this narrative. An upcoming Fed interest rate decision on March 22 will provide clarity on the yield trajectory. Additionally, earnings reports from both JEPI and FFEM holdings in the coming weeks will offer insights into the funds' underlying fundamentals and potential resilience against yield-driven volatility.