Volatility Could Be Up Ahead for Emerging Markets

Investors have been feeding off news that U.S. President Donald Trump is open to extending the 90-day trade truce that is set to expire on March 2. The softened stance by President Trump didn’t necessarily surprise investors, but rather confirmed their notions.

“Markets always assumed the March 1 trade deadline was flexible, but this just confirmed it,” Tom Essaye, founder of The Sevens Report, wrote in a note. “Bottom line, the fundamentals are roughly balanced right now as there is optimism that a trade deal will get done.”

“Looking ahead, a trade deal could reduce concerns about growth and allow the 2019 rally to continue,” Essaye added.

As the trade deadline looms, however, it could be a bumpy ride for emerging markets. As news regarding trade permeates the 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.

In the video below, Alessio De Longis of Oppenheimer Funds and Alli McCartney, managing director at UBS, joins “Squawk Box” to discuss the broader markets following the long holiday weekend. The panel touches on whether the markets have reached its lows as well as global and emerging markets.

For more market trends, visit ETF Trends.