Despite U.S. stocks trading dramatically lower on Monday as the ongoing trade war between the world’s largest economies heats up, it may be good news for investors looking to get into emerging markets who missed the boat previously.
As ETF Trends CEO Tom Lydon explained on CNBC’s Power Lunch on Monday, “Individual investors are way under-allocated overseas, especially emerging markets, and emerging market PE ratios are almost half off what the S&P is. So if you’ve missed this emerging markets run, this might be one of those opportunities. That doesn’t mean it’s not going to get worse before it gets better. But there are some excellent broad based emerging market ETFs out there to consider.”
With the Federal Reserve looking like it will hold off on raising interest rates this year and some emerging markets currencies rebounding, emerging markets debt exchange traded funds (ETFs), including the ProShares Short Term USD Emerging Market Bond ETF (CBOE: EMSH), could be solid ideas for income investors looking for some international diversification.
Alfred Eskandar, co-founder of Salt Financial, also weighed in on the current trade war and opportunities for investment during the Power Lunch segment.
“I love this valuation perspective. You know Tom’s right, this might be an interesting entry point. But if you think about emerging markets, what it’s really telling you is this is a global supply chain issue. You’ve got suppliers and obviously the demanders of those goods both in turmoil. There is a lot of uncertainty driven by the China-U.S. trade talks and we are seeing the market sell off because of it,” Eskandar said.
Ultimately, looking at the markets from a longer term perspective may be required as Lydon expounds.
“You’re not gonna bet against Trump. He is a black-belt negotiator. He’s not concerned about what the market is doing this week. Long term, he wants to get his trade deal and he’s gonna do whatever he can to get that. We have low volatility opportunities out there… Don’t run away, cause things could turn around,” Lydon said.
“Well you can’t avoid systematic risk, and that’s what all these stocks have. So they’re sensitive to the overall market movement, and as you’re seeing, you mentioned earlier, you know, the low volatility stocks, they’ll be less sensitive. So they tend to be a safe haven in markets like this,” Eskandar added.
Investors looking to get involved with emerging markets might also consider other broad-exposure ETFs like the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) or iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG).
Watch the full CNBC segment featuring Tom Lydon:
For more ETF-related commentary from Tom Lydon and other industry experts, visit our video category.
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