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On Real Vision’s Trade Ideas, Pension Partners portfolio manager and Lead-Lag Report author Michael Gayed criticized the Fed for its “wishy-washy” rate cut.
He said the Fed’s lack of confidence damages the “illusion of certainty” in the future that the market needs, and that this meant the rate cut had the effect that a rate hike usually has – a higher dollar and falling S&P 500.
Still, Gayed believes that the dollar is too strong. “I suspect the powers that be will probably try and bring It down,” he said. “And if that’s the case, if you want to bet on the stuff that would be most correlated to that weaker dollar, [you want] emerging markets, financial markets, commodities.”
The Trade
Specifically in emerging markets, Gared likes the iShares MSCI Emerging Markets ETF (EEM). He has liked this trade for a month or so, and thinks it could outperform the S&P 500 by 20% over the next few months.
“Just from a contrarian standpoint… you want to bet on all the areas which have failed to participate because the dollar has been so strong,” he added. “If you like to buy low, sell high, I don’t know why you’d want to buy the S&P.”
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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