Market check: Volatility increases in the U.S. Dollar, how to play emerging markets
Yahoo Finance Live's Jared Blikre reports from the New York Stock Exchange to run down how the U.S. Dollar and markets are performing, plus what investors should consider when investing in emerging markets ETFs.
Video Transcript
BRIAN SOZZI: Let's get down to the New York Stock Exchange now and check in with Jared Blikre to see what he's watching for. Jared?
JARED BLIKRE: Yeah, let's talk about emerging markets. And in order to do that, we've got to talk about the US dollar first. Let's go to the YFi Interactive. I'm looking at a two-month chart of the DXY, the dollar index. And we've had some activity lately. We perked up. And volatility has increased as well.
We don't usually get a lot of movement here. But it definitely has picked up. This is a two-month chart. I'm going to switch to-- let's do a three-year, and we can see, we've hit this level that was in play in prior years. So we might take a little pause here, as I've been saying. But I think the direction is up.
You take a look at a max chart of the DXY going back to the 1980s. One analyst I'm talking to sees 120 in the cards. That would be the high from 20 years ago. If that happens, it has lots of implications for foreign markets. And in that case, emerging markets probably not going to do that well.
But when we talk emerging markets, we have to be very specific about how we're playing them because you take an ETF like EEM, this is one of the more common ones. You look at the year to date performance, and it's underwater by 1%. It's heavily weighted toward Chinese stocks, which we know have been just getting hammered this year.
Some of the top holdings in this ETF, Alibaba, Tencent, and the like, also a number of Korean firms, chipmakers as well, Taiwan Semi. So arguably, these are not even emerging market companies. If you happen to be in China, you kind of get saddled with that.
But there are lots of different ways to play it. We've been talking about India on the rise. There are India ETFs if you like particular regions. There's one for Brazil. You can play the old BRICs, which would be Brazil, Russia, India, and China. I would say China is out of the group now.
But nevertheless, when we talk about emerging markets, you really have to understand what is in the ETF and what is your long-term view because, as I said, if the US dollar is heading higher, that's going to put a lot of pressure not only on emerging markets but Bitcoin. One thing I did neglect to include in my discussion about Bitcoin earlier is that an appreciating dollar is part of my framework. And I see that as holding back all currencies, including the cryptocurrencies. Guys?
BRIAN SOZZI: Jared Blake, thanks so much.
