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Market Analysis2025-09-27
Dollar Weakness Boosts Emerging Market ETFs: Time to Revisit Global Asset Allocation
As the dollar continues to weaken, emerging market ETFs such as EEM and EMCG are gaining strength. It is time to revisit your global portfolio's asset allocation and consider increasing exposure to emerging markets.
AdminNaver
The dollar index has been falling day after day, drawing growing attention to emerging market assets. As emerging market ETFs like EEM and EMCG continue to climb, it is an opportune moment to restructure your global portfolio using an asset allocation calculator.
The Relationship Between Dollar Weakness and Emerging Market Assets
With the dollar index declining for three consecutive months, emerging market currencies have been gaining relative strength. EEM (Emerging Markets ETF) surged 5.8% over two weeks, outperforming U.S. equities. A weaker dollar reduces the burden of dollar-denominated debt for emerging market companies and tends to push commodity prices higher, benefiting resource-dependent emerging economies. It is worth using an asset allocation calculator to explore increasing emerging market ETF exposure from the typical 5–10% range to 10–15%.
EEM vs. EMCG: How to Choose an Emerging Market ETF
EEM covers the broad emerging market universe on a market-cap basis, with top holdings including TSMC, Tencent, and Samsung Electronics. EMCG focuses on consumer-oriented emerging market companies, pursuing a domestic consumption growth theme. When setting the allocation ratio of these two ETFs using a rebalancing calculator, investors seeking technology exposure may want to tilt toward EEM, while those betting on consumer trends might favor EMCG. A starting point of roughly 70% EEM and 30% EMCG, adjusted based on market conditions, tends to be effective.
Currency Risk and Hedging Strategies
Currency fluctuations are the biggest variable in emerging market investing. During periods of dollar weakness, currency gains add to returns, but a reversal to dollar strength can become a drag on performance. It is important to set currency exposure limits using an asset allocation calculator and keep non-dollar assets below 25% of the total portfolio. Strategies worth considering include partially using currency-hedged ETFs or balancing exposure with dollar-denominated safe-haven assets such as AGG or TLT.
Geopolitical Risk and Diversification
When investing in emerging markets, diversifying away from the political risks of individual countries is essential. EEM spreads exposure across China, India, Taiwan, South Korea, and others, mitigating single-country risk. Use a rebalancing calculator to check for regional concentration, and if China's weighting grows too large, it is advisable to shift some exposure to other regions. Maintaining a balanced weighting with U.S. ETFs such as VTI or VOO also helps build portfolio resilience against geopolitical shocks.
Emerging Market Strategy from a Long-Term Investment Perspective
Emerging markets, supported by higher economic growth rates and demographic dividends, have the potential to outperform developed markets over the long term. However, their higher volatility makes a systematic approach through an asset allocation calculator essential. A lifecycle strategy that increases emerging market exposure at younger ages and gradually reduces it as retirement approaches tends to be effective. Rebalancing should be done quarterly, with additional adjustments during periods of sharp volatility, to maintain long-term target allocations.
Conclusion
In a period of dollar weakness, emerging market ETFs offer attractive investment opportunities, but risk management is paramount. Use an asset allocation calculator and a rebalancing calculator to set appropriate weightings, and build a diversified investment strategy that accounts for currency risk and geopolitical risk. The key to success is constructing a global portfolio with a long-term perspective rather than being swayed by short-term gains.
