This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Global Macro: Traders Turn to Emerging Markets

NEW YORK (TheStreet) -- Investors are choosing emerging-market equities over U.S. indices as the government shutdown continues.

Volatility is spiking, and traders are bidding bonds higher. That has hurt U.S. equity indices, while emerging markets have diverged on a path toward relative strength.

Emerging-market equities saw weakness during the period leading up to September's Federal Reserve meeting. Investors expected monetary stimulus to be reduced and thus higher interest rates.

When the Fed did not come through on expectations, emerging equities were bid higher and ultimately crashed lower in subsequent days back to their intermediate support line.

The chart below is of iShares MSCI Emerging Markets (EEM).

The weakness many emerging economies faced due to the rumor of tighter U.S. monetary policy caused valuations to become cheap and thus attractive. The index has been bought off of support levels and is now pushing higher as U.S. equities fall.

As investors remain wary of allocating funds to riskier U.S. assets, look for emerging markets, with their improved growth outlooks, to continue to trade higher.

The next chart is of the USDJPY currency pair. The dollar has traded lower due to weakening U.S. interest rates and investors' preference for currencies with less geopolitical risk than the dollar now has.

The weaker dollar is pushing funds into emerging economies as was stated above, and even into perceived stronger economies such as Europe.

Still, the U.S. is not expected to default on its debt obligations. Although volatility has increased, the iPath S&P 500 VIX ST Futures ETN (VXX) is nowhere near the levels that would be anticipated if investors truly thought the U.S. government was going to default. Still, investors are proving their mistrust in the U.S. by pushing riskier investments abroad.

At the time of publication the author had no position in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Andrew Sachais' focus is on analyzing markets with global macro-based strategies. Sachais is a chief investment strategist and portfolio manager at the start-up fund, Satch Kapital Investments. The fund uses ETF's traded on the U.S. stock market to gain exposure to both domestic and foreign assets. His strategy takes into consideration global equity, commodity, currency and debt markets. Sachais is a graduate of Georgetown University, where he earned a degree in Economics.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,051.73 -48.45 -0.28%
S&P 500 1,973.63 -4.59 -0.23%
NASDAQ 4,424.7040 -7.4420 -0.17%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs