August has arrived, with markets getting ever closer to the next Fed meeting in September. The gap between meetings allows investors to reflect and debate whether the Fed is truly set on one more rate hike. The central bank has already raised rates faster than at any point in decades. And it could be near the end of the rate cycle. If that is the case and the U.S. dollar weakens in turn, investors may want to turn to an emerging markets ETF.
Yes, market watchers are still debating whether we will see one more rate hike or more. One of the more hawkish Fed Governors did recently suggest multiple hikes could still be needed, but economists and many market watchers look to be predicting just one more hike, or even none. If the regime really does hit a “higher for longer” approach, the dollar might weaken.
That would see other currencies benefit vs. the dollar, with rate risk concern driving investors away from rampant bond mania. Instead, other currencies might pick up attention, helping an emerging markets ETF. As those currencies grow in value, its users can push them further, boosting economic growth.
The Emerging Markets ETF EDOG
The ALPS Emerging Sector Dividend Dogs ETF (EDOG) could be one to benefit, relying on the dividends of the Dow approach. EDOG chooses the five firms with the highest dividend yield in each of the ten GICs sectors.
It equal weights its holdings in the emerging markets world, totaling 50 large-cap EM stocks. EDOG uses dividends to help identify healthy, forward-looking companies in lower information markets. It adds dividends to the overall return picture the emerging markets ETF offers its investors. The ETF’s highest-weighted countries include Brazil, China, and Thailand at 10%, 10%, and 11% respectively.
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