ETF Edge on positioning in international markets amid the war in the Middle East
Speakers
Summary
- Emerging Markets "Double Down": Despite Middle East tensions, the macro thesis is shifting toward a weaker US Dollar and increased US spending, which historically fuels Emerging Markets (EM).
- The "Barbell" Strategy: Investors are advised to balance the high-growth/AI trade in Asia (Korea/Taiwan) with deep value and cyclicality in Latin America (Brazil/Argentina/Colombia).
- Latin American Financials: This is the highest conviction sector overweight, predicated on falling rates stimulating credit growth in economies with high real rates.
- Energy Segmentation: In light of geopolitical conflict, the energy trade is splitting into three distinct vehicles: Spot Price (high beta), Equities (operational risk), and Pipelines (yield/stability).
Trade Ideas
"We start to get used to the concept of geopolitical heat. It's what put the defense theme so in focus starting last year." Geopolitical instability is no longer a "shock" but a structural baseline. This sustains long-term government spending on defense, making the sector a core holding rather than just a tactical trade. Long Aerospace & Defense ETFs. Government budget cuts or regulatory caps on defense contractor profits.
"We think it might be time to double down... finding it in Latin America... Argentina... Brazil... and Colombia." He cites valuations at a 50% discount to the S&P and high real rates (Brazil overnight rates at 15% with 4.5% inflation). The combination of political reform (Milei in Argentina, upcoming elections in Brazil/Colombia) and the start of a rate-cutting cycle creates a "double whammy" of multiple expansion and currency carry appeal. Long Latin America regional ETFs as a value/cyclical play to complement US Tech exposure. A resurgence in US inflation forcing the Fed to stay hawkish, strengthening the USD (the anti-EM trade).
"I'm curious to see if folks are going to target say an oil fund like USO... or an energy equity like an XLE... or if they're going to go to something like AMLP... which gives you an 8% yield." Geopolitical conflict drives energy volatility. Investors must choose their instrument based on risk tolerance: USO for direct commodity price exposure (high risk), XLE for equity upside, or AMLP for defensive yield (pipelines) if the conflict drags on but oil prices stabilize. Watch these three distinct vehicles to gauge market sentiment on the duration of the Middle East conflict. Rapid de-escalation leads to a sharp drop in oil prices.
Malcolm Dorson
Head of Active Investment Team, Global X Funds
"Our biggest overweight from a sector perspective is going to be in financials [in Latin America]." As central banks in LatAm cut rates from historic highs, net interest margins may compress slightly, but this is outweighed by improved asset quality, increased loan volumes, and a resurgence in capital markets activity. Long Brazilian/LatAm banks (Tickers listed are the major US-listed Brazilian banks). Policy errors by local central banks or political interference in the banking sector.
Malcolm Dorson
Head of Active Investment Team, Global X Funds
"India is a really interesting overlooked place... GDP growth is at 7.8%... Central bank's cutting rates." India underperformed early in the year, making it a "laggard" trade. High local gold ownership (20% of savings) combined with record gold prices creates a massive wealth effect, boosting consumer confidence and domestic spending. Long India broad market ETFs to capture the domestic consumption boom. Valuation concerns (India often trades at a premium) and oil price shocks (India is a net energy importer).
Up Next
This CNBC video, published March 03, 2026, features Cinthia Murphy, Malcolm Dorson discussing XAR, ITA, ARGT, EWZ, GXG, XLE, USO, AMLP, BBD, NU, ITUB, INDA, EPI. 5 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Cinthia Murphy, Malcolm Dorson · Tickers: XAR, ITA, ARGT, EWZ, GXG, XLE, USO, AMLP, BBD, NU, ITUB, INDA, EPI