Emerging Market Assets: What’s does Fed and data imply?

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Nothing about today's data and the data this week give the Fed any reason to change the taper trajectory.

[caption id="attachment_33930" align="alignright" width="240"] Tim Seymour Tim Seymour[/caption]

Markets are pricing September beginning and mid to late 2014 end.  Markets, some would argue are doing the Feds work, although the Fed has given the tapering guidance that has allowed the market to do their work.

Based on the above, Treasuries should be trading in a range of 2.50-2.80% into tapering.  In this range trade emerging market assets (rates) have the ability to outperform.

There is no significant data to drive sentiment for 3 weeks, and with this backdrop emerging markets can outperform.

Specifically, while emerging market rates remain under pressure from taper sentiment they should outperform when spread against U.S. Treasuries.  Emerging markets currencies get a boost from the data and the window of no news.

Remember, emerging market currencies is 50% of your return profile on the equity side, and into the September payroll data emerging market equities will have a tailwind in currencies that were oversold into this Fed meeting and large economic calendar.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , International , Stocks

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