When it comes to the U.S. economy, if you bring up the thought of a recession to Treasury Secretary Steven Mnuchin, he might give you a look of bewilderment. That’s because compared to the rest of the world, Mnuchin views the U.S. as the only shining star.
“U.S. growth it still really the bright spot of the world,” Mnuchin told CNBC’s Nancy Hungerford.
“As it relates to the employment numbers, I wouldn’t focus on any one number: There’s plenty of volatility in these numbers,” he added. “We still see the growth in the U.S. as really quite strong.”
Mnuchin’s comments come as the Labor Department recently revealed that only 75,000 jobs were created in May, which could be a sign that the U.S. economy could be on the verge of a slowdown. Nonetheless, the unemployment rate remained at a generational low of 3.6 percent.
“I don’t see any signs of a recession. I would say the bond markets are predicting … a lowering of interest rates. We are in an environment where global interest rates are very low around the world, so I think that’s what you’re seeing in the U.S. bond markets,” he said. “But, no, we see no signs of a recession. We see another strong quarter in the United States.”
Getting International Diversification
To complement domestic investments based on Mnuchin’s optimism on the U.S. economy, overseas exposure within international markets can give investors the much-needed diversification their portfolios require, which is where the Franklin LibertyShares International Equity Model is of vital importance.
The Franklin LibertyShares International Equity Model is an asset allocation model, driven by Dorsey Wright’s Relative Strength Matrix that is comprised of Franklin Templeton’s passive suite of exchange-traded funds (ETFs). The ETFs provide exposure to various countries, including developed markets like Germany and Canada, while at the same time, provides the necessary exposure to emerging market countries like Brazil and Mexico.
“With the launch of our single country and regional passive ETFs, working with Dorsey Wright to leverage their unique methodology for constructing asset allocation models was a natural fit,” said Pierre Caramazza, SVP, Head of ETF Distribution. “International equities have challenged overall portfolio returns in the back half of this year, piquing interest in managing the related risks by identifying relative strength of countries and regions in the international equity market, maintaining exposure to those driven by price momentum and eliminating exposure to those exhibiting lower relative price momentum.
“Advisors are accustomed to the low cost of broad index funds, but have not been enamored with the returns. Our Franklin LibertyShares International Equity Model potentially allows them the best of both worlds, using Dorsey Wright’s disciplined, trend following approach and Franklin’s low-cost FTSE-indexed ETFs.”
Trade wars have certainly hampered certain areas of international equities, especially emerging markets, but their valuations relative to price offer investors excellent value propositions.
Furthermore, the model is to identify the relative strength of countries and regions in the international equity market space, maintaining exposure to those particular ETFs that are driven by price momentum. The model invests in the top five highest scoring ETFs from the inventory options and will rebalance that exposure only after the scores drop below the median.
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