Play Video Five experts on how investors should position portfolios amid US-China trade war
Trade tensions have heated up between the United States and China as the Trump administration plans to implement yet another round of tariffs on the world's second-largest economy. While the major U.S. indices have largely shrugged off the volatile negotiations — the Dow and S&P 500 are trading at record highs — top market watchers say there's still growth potential overseas.
"We feel like [the EEM has] borne the brunt of these trade negotiations so far and valuations there look really attractive on a price-to-cash flow basis," said Tracie McMillion, head of Global Asset Allocation Strategy at Wells Fargo Investment Institute.
The EEM Emerging Markets ETF has tumbled nearly 10 percent since January, with declines fueled by concerns of a global economic slowdown and rocky trade discussions. However, McMillion also noted that while large-cap U.S. stocks may still have some upside left, the group has largely maxed out their gains for the year.
"Should we see any progress in these trade talks with China that sentiment towards emerging markets could also change and that could be a nearer-term catalyst," she said Tuesday on CNBC's "Squawk on the Street."
Strong earnings and a surging economic backdrop have pushed nearly $170 billion into U.S. ETFs and out of international funds this year, according to Tom Lydon, president of Global Trends Investments and editor of ETFtrends.com. However, Lydon said the rotation out of global investment funds — like the EEM — have now made the group more attractive on a valuation basis.
Kathryn Rooney Vera, BullTick Capital Markets head of research and chief markets strategist, said that while international currencies have been "really beaten up lately" the group has seen a recovery of late and are beginning to look like a buy.
However, as U.S. businesses have helped push the major indices to new records, Grant Bughman, senior equity specialist at UBS Asset Management, said the markets would see even more gains if trade negotiations stabilized.
"You look at 2019, obviously the growth rate is going to come down as the year over year," he said Tuesday on CNBC's "Power Lunch." "I think the baseline view for us and many other investors is that it's a negotiating tactic, and I think that cooler heads will prevail in the White House to not employ a lot of the tariffs as they're kind of tweeted about day to day."
For those who seek a more cautious investment strategy altogether, Lisa Erickson, head of traditional investments group at US Bank Wealth Management suggests staying put in U.S. equities. Erickson cautioned on CNBC's "Power Lunch" that investors should take a "wait and see" attitude as trade discussions pan out.
