The United States is set to place over $200 billion in tariffs on goods coming from China. In retaliation, China is ready to place their own. With the trade war underway, you are going to want to focus on emerging markets exchange-traded funds (ETFs).
Investors have been steadily contributing capital into ETFs. So far, over $167.9 billion inflows have been placed so far, and according to Tom Lydon, president of Global Trends investments, there is an increase of money to the U.S. equity ETFs over international ones now, compared to the start of the year. With the S&P 500 reaching record highs, and the possibility of a trade war, investors are playing it safe and investing in the U.S. stock market.
The price-to-earnings ratio has been around 10 for China, and 11 for emerging markets. The ETFs for certain emerging markets are displaying as inexpensive while some are going to be able to be obtained at 14 basis points on the expense ratio. When looking at who to invest in, it is better to invest in countries that are in good fiscal position and that have good policymakers leading the country.
If China and the U.S. are able to talk out their differences, China, and other emerging markets are going to be able to get boosts their ETFs. Emerging markets ETFs, while down now, would benefit greatly and even be able to turn their negative around if the two countries come together.
Currently, Chris Siniokov of Franklin Templeton Investments believes that the Philippine peso is going to get worst while believing that the Aussie will lower in comparison to the New Zealand currency.
While some emerging market ETFs are appealing, in the past couple of weeks, the US dollar has gone up over 3.5%. Even with tariffs being placed by China on U.S. goods, the dollar is still looking strong. With the US dollar is seen as one of the more popular global reserve currencies, the more that the dollar increases, the difficult it will be for developing countries to pay off their debt. Resulting in some emerging countries struggling to look appealing to investors.
With the uncertainty of the trade war and increased dollar strength, some emerging markets should be invested over others. When deciding where to invest you have to look at what is occurring in the emerging country, as well as what policies are going to be implemented by the leader. Diversify your portfolio, and ensure that you don’t have all your eggs in one basket.