More coronavirus news continues to flood the markets, making investors sick in the process as the Dow Jones Industrial Average fell as much as 500 points in Monday’s trading session before recouping the losses later in the day. Analysts watching the markets closely compare the outbreak to the severe acute respiratory syndrome (SARS) outbreak in 2003, which is causing them to believe the response thus far could be overblown.
“If the outbreak follows the course of past ones this century, the global economy faces just a temporary stumble,” Michael Gregory of BMO Capital Markets said in a note to clients.
Per a CNBC report, the SARS outbreak “contributed to a slump in global markets in early 2003, but stocks recovered once the outbreak was contained. The S&P 500 dropped roughly 10% from the start of the year until mid-March, but finished up more than 26% for the whole year.”
Furthermore, it gave hesitant investors looking to jump into a white-hot market a reason to stay on the sidelines.
“The market was looking for some news that would dampen the recent enthusiasm. This news of the virus creates a perfect storm and it might make investors ignore the Fed’s accommodative stance, the macro news and the good earnings that so far have been coming out,” said Peter Cardillo, chief market economist at Spartan Capital Securities.
Relative Trade Option for a Healthy U.S. Equities Market
Despite the fears of the coronavirus, the healthy U.S. market environment creates an opportunity for investors to capitalize on the Direxion FTSE Russell US Over International ETF (NYSEArca: RWUI).
- Seeks investment results, before fees and expenses, that track the Russell 1000®/FTSE All-World ex-US 150/50 Net Spread Index (the “index”).
- The fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in securities that comprise the Long Component of the index or shares of ETFs on the Long Component of the index.
- The index measures the performance of a portfolio that has 150% long exposure to the Russell 1000® Index (the “Long Component”) and 50% short exposure to the FTSE All-World ex-US Index (the “Short Component”).
Investors looking to play the other side can use the Direxion FTSE International Over US ETF (NYSEArca: RWIU) to capitalize on international equities will outdoing U.S. equities. RWIU seeks investment results, before fees and expenses, that track the FTSE All-World ex-US/Russell 1000 150/50 Net Spread Index, which measures the performance of a portfolio that has 150 percent long exposure to the FTSE All-World ex-US Index and 50 percent short exposure to the Russell 1000® Index.
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