As emerging market stocks have fallen under pressure in 2018, the selloff will only continue to get worse as U.S. interest rates rise, according to Washington Crossing Advisors portfolio manager Chad Morganlander.
Over the past three months, the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) and the iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG), the two most popular and largest EM-related ETFs on the market, dipped 4.9% and 4.1%, respectively. Meanwhile, the U.S. Dollar Index has strengthened to 93.55, its highest level since the start of the year.
Morganlander appeared on CNBC’s Trading Nation on Friday to discuss why his firm is paying close attention to emerging markets and the Federal Reserve.
“As China tries to deaccelerate that credit growth, it will have a dampening affect on global growth, but in particular, it will have a dampening affect on emerging markets growth,” Morganlander said.
“As the Federal Reserve starts to raise interest rates, that will have a positive affect on value companies here in the United States and as well will have a dampening affect on the emerging market trend as we believe the U.S. Dollar will continue to gradually grind higher.”
Watch the full segment on CNBC below:
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