With positive news thus far coming out of U.S.-China trade deal negotiations in the month of October, emerging markets are gaining once again after starting off 2019 with strength. Despite the recent spate of optimism, it’s still necessary to take caution especially when looking at the overall global landscape as geopolitical events will continue to drive the EM space.

“Overall, emerging markets are benefiting from the global macro backdrop, but we advocate taking a more selective approach and monitor each country flare-up independently,” said Anders Faergemann, a London-based senior money manager at Pinebridge Investments, which oversees about $97 billion. “The focus will be on Argentina’s election and other country-specific events such as the tense situations in Lebanon, Chile and Ecuador.”

In addition to Argentina, some other events to watch per a Bloomberg report:

  • In Brazil, markets are expecting an interest-rate cut by the central bank.
  • China will provide an indication of its economic health in the fourth quarter with the release of its official and Caixin manufacturing PMIs on Thursday and Friday.
  • Taiwan will report its preliminary third-quarter GDP data on Thursday.
  • South Korea’s export figures –a bellwether for global trade–will be released Friday.
  • Inflation numbers from South Korea, Thailand and Indonesia are scheduled to be released on Friday.
  • Turkey’s central bank is set to lower its inflation targett for 2019 on Thursday, according to Bloomberg Economics
  • Mexico’s GDP is scheduled to be released Wednesday

Investors who sense weakness in emerging markets can look to the Direxion MSCI Developed Over Emerging Markets ETF (NYSEArca: RWDE). 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.

The fund seeks investment results that track the MSCI EAFE IMI – Emerging Markets IMI 150/50 Return Spread Index. The index measures the performance of a portfolio that has 150% long exposure to the MSCI EAFE IMI Index (the “Long Component”) and 50% short exposure to the MSCI Emerging Markets IMI Index (the “Short Component”).

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.

For more relative market trends, visit our Relative Value Channel.