Reaching for Risk? Try Emerging Markets ETF (EEM)

ECB President Mario Draghi fired his "big bazooka" on Thursday, or at least that is how the market interpreted his press conference comments.

The ECB would engage in potentially unlimited "outright monetary transactions," meaning that the ECB would buy as many short-term bonds as it takes to keep yields manageable. To drive home his point that he means business, Draghi added with rhetorical flourish that "the euro is irreversible."

NOT SO FAST BUDDY
We shall see. We've been made promises before only to be disappointed later by failure to execute. "Irreversible" may or may not include an eventual Greek exit. And far more critically, Spain and the bailout institutions remain in a sort of standoff; Spain will not be given a bailout (including the ECB bond buying) until it submits to strict conditions, but Spanish Prime Minister Mariano Rajoy will not request a bailout until he knows in advance what the conditions will be. Presumably, negotiations have been going on behind closed doors between Spain and the bailout institutions.

BIG BOUNCE IN SPANISH ETF
In any event, the markets are taking the meeting as an unambiguous positive. My recommendation last week--the iShares MSCI Spain ETF (EWP)--has enjoyed a phenomenal bounce, as have most risky assets.

Barring an unexpected twist from the German Constitutional Court on September 12, I think we could be looking at a monster rally to finish the year in most risky assets.

REACH FOR RISK
I recommend investors add a little risk to their portfolios on any pullbacks. And I'd start with an allocation to emerging markets. The iShares MSCI Emerging Markets ETF (EEM) should benefit handsomely from a revival in investors' animal spirits.

DON'T MISS OUT
Be on the lookout for unexpected ripples coming out of Europe. But don't let fear keep you from participating in what could be the best rally of the past several years.

Learn more on what the September German court ruling could mean.

Build up your Watch List from new TraderPlanet stories here.



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