Home Trading ETFs The Reflation Trade – iShares MSCI Emerging Markets ETF (NYSEARCA:EEM)

The Reflation Trade – iShares MSCI Emerging Markets ETF (NYSEARCA:EEM)

by TradingETFs.com
The Reflation Trade - iShares MSCI Emerging Markets ETF (NYSEARCA:EEM)


On Real Vision’s Trade Ideas, Pension Partners portfolio manager and Lead-Lag Report author Michael Gayed shared his view that a reflation trade is on the cards for the next three to six months.

Nothing the Fed has done has caused inflation expectations to sustainably pick up, and it remains to be seen whether inflation expectations will rise in the longer term. But Gayed believes that they will rise in the next three to six months, which gives investors several opportunities.

The Trade

The unfolding reflation trade is likely to see emerging markets rallying, Gayed said. Investors can benefit from this rally by buying the emerging markets ETF EEM, where Gayed sees 20 to 30% upside potential over the next three to six months.

“When emerging run, they run 2000, 3000 basis points over the S&P pretty quickly,” he pointed out.

Financials and commodities also make a lot of sense if you think that “there has already been an overreaction in the disinflation trade in the near term,” Gayed said.

However, Gayed emphasized the short-term nature of the reflation trade, saying: “All of this is short term. I still maintain that long term, deflation is probably more likely than not in our future.”

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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