Volatility Could Be Up Ahead for Emerging Markets

Emerging markets investors have been feeding off the latest U.S.-China trade negotiation news, especially now that U.S. President Donald Trump is open to extending the 90-day trade truce that is set to expire on March 2. In the meantime, optimism permeating throughout the capital markets on a permanent trade deal getting done is reflected in emerging markets ETFs that have been receiving the lion’s share of net inflows.

According to data from XTF.com, emerging markets ETFs occupy four of the top 10 in net inflows as of February 21:

Emerging Markets ETFs Receiving the Majority of Net Inflows 1

As the trade deadline looms, however, it could be a bumpy ride for emerging markets. As more news regarding trade floods the capital markets, the EM space will be one of the more sensitive areas to respond.

For investors looking for the continued upside in emerging market assets, whether driven by a weakening USD or continued developments around trade, the Direxion MSCI Emerging Over Developed Markets ETF (NYSEArca: RWED) offers them the ability to benefit not only from emerging markets potentially performing well, but from emerging markets outperforming developed markets.

Conversely, if investors believe that resolutions to the big issues impacting sentiment today are in motion, the Direxion MSCI Developed Over Emerging Markets ETF (NYSEArca: RWDE) provides a means to not only see developed markets perform well, but a way to access a convergence/catch-up in performance of DM relative to EM, a spread that has clearly widened over the past 6 months.

For more market trends, visit ETF Trends.