It may be time to delve deeper into emerging market trading.
Despite the risks associated with the war with Iran, GlobalX ETF’s Malcolm Dawson said tailwinds for the group include a weakening dollar and domestic uncertainty.
“Maybe it’s time to double down,” a senior portfolio manager at the firm told CNBC’s ETF Edge.
He expects a sharp increase in US war spending to soften the US dollar, which soared this week, creating a favorable backdrop for emerging markets.
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Asked whether there was a chance the dollar would remain strong in the short term, Dolson said: “Certainly.”
But that’s not his basic case.
“Many people are trying to say this situation will be over in a week or two, but we are not sure,” he said. “But I think there are a lot of reasons to take advantage of the push here.” [in emerging markets.]”
As of market close on Wednesday, the iShares MSCI Emerging Markets ETF (EEM) was down more than 5% since the beginning of the week. It’s still up about 37% over the past year.
VettaFi’s Cinthia Murphy also believes there are benefits to putting money overseas, saying investors are becoming accustomed to geopolitical noise.
“There is no doubt that international was a feature of this year,” said the company’s research director.
Murphy points out that energy is an area to focus on if the Iran conflict becomes protracted.
“European markets are highly dependent on energy and oil from the Middle East,” he said. “So I think that could shake things up a lot.”
Murphy pointed to the United States Oil Fund (USO) as a potential energy resource. As of Wednesday’s close, the stock is up 12% so far this week and 32% this year.
