The S&P 500 continues to make a steady, relatively linear climb en route to more gains as the index is up over 10% for the year. Global equities are playing a high-stakes game of follow the leader as their respective major indexes rise alongside the S&P 500.
The anticipation of rate cuts is fueling a flight to emerging markets (EM) assets. Why? Because the prospect of a weaker dollar increases. Whether for short- or long-term gain, investors may want to take a look at the growth prospects of EM.
“I advise investors to always have an emerging markets exposure,” noted KraneShares Senior Investment Strategist Anthony Sassine. “But you look at it in the short term. I definitely think it’s very well positioned to do well in the next three to five years. Given where we are in valuation and growth. And given the individual stories that you have from one country to another.”
Additionally, European equities are showing signs of strength as investors look to cash in on rate cut bets. The expectation that the U.S. Federal Reserve will be on its path to cutting rates mirrors that of the European Central Bank (ECB).
“Investors continue to bet on upcoming rate cuts from central banks around the world, and this confidence is clearly reflected in the market at the moment,” said Pierre Veyret, technical analyst at ActivTrades, citing the dovish attitude of the ECB.
“Even if some indices are already trading in uncharted territory, it seems that no one wants to exit the bullish train, driven by a fear of missing out on the rally,” added Vevret.
2 Trades to Consider
When U.S. markets are trending higher, there could be a latency effect with European and EM equities following suit. In this case, if the follow-the-leader dynamic continues, traders can use leveraged ETFs to profit in both global markets.
If EM continues to garner more investor interest, traders should take a look at the Direxion Daily MSCI Emerging Markets Bull 3X Shares (EDC). The fund seeks daily investment results equal to 300% of the inverse performance of the MSCI Emerging Markets Index. Additionally, that index is designed to represent the performance of large and mid-cap securities across emerging market countries.
In the case of European equities, one trade worth considering with the same triple leverage as EDC is the Direxion Daily FTSE Europe Bull 3X ETF (EURL). EURL seeks daily investment results equal to 300% of the daily performance of the FTSE Developed Europe All Cap Index. The index is market capitalization-weighted. It is designed to measure the equity market performance of large, mid, and small-cap companies in developed markets in Europe.
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