Emerging markets may have taken a vicious battering on fears the Federal Reserve may soon remove the easy money punch bowl, but a turnaround in sentiment could be equally dramatic should the U.S. central bank move to soothe some of the jitters this week.
According to Ed Dempsey, founder and chief investment officer of New York-based investment adviserPension Partners, these assets are set for a strong comeback if Fed Chairman Ben Bernanke surprises markets by indicating continued stimulus.
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"You could get a very large oversold rally [in emerging markets] if you get a favorable outcome [from the Fed]," said Dempsey.
Worries over the potential tapering of the Fed's $85 billion a month quantitative easing program have prompted a worldwide sell-off in recent weeks, with emerging markets experiencing a particularly ugly correction.