The “great rotation” sounds like a basketball coach’s dream roster or a stomach-churning Ferris wheel, but it’s a common notion thrown around in the financial world that a mass movement from bonds to stocks will occur starting this year. Does this mean a movement into U.S. equities will outpace international equities?
The bull market is getting longer in the tooth and there could one final surge into equities before it finally runs out of steam. 2019 saw a more strategic move to bonds after the fourth quarter of 2018 spooked investors into more safe haven assets.
After a 2019 that saw the major indexes reach record highs, investors might be inspired enough to head back into stocks, and thus translate into strength for U.S. equities. With the Dow Jones Industrial Average rising 22% in 2019 and the S&P 500 up 28%, it’s hard to argue against diving headfirst back into the stock market.
“After almost 11 years of equity market rally off the 2009 low, it is futile not to call this a ‘great bull market.’ It is,” said Julian Emanuel, chief equity and derivatives strategist at BTIG. “And the public will ‘fall in love’ with stocks once more — potentially sending prices materially higher from these already ‘commanding heights’ — before the bull market ends.”
The Macro Trend in U.S. Equities
A “great rotation” from bonds to stocks could feed into a macro trade of U.S. equities over international equities. This creates an opportunity for investors to capitalize on the Direxion FTSE Russell US Over International ETF (NYSEArca: RWUI).
RWUI features:
- 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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