Can Higher Wages Keep U.S. Equities Strong Through 2020?

Historically low unemployment levels have persisted in the job market and now it’s getting another shot in the arm as a considerable number of Americans are set to start 2020 with pay raises.

“Starting on Wednesday, there will be 47 new wage increases hitting workers in cities, counties and states across the country, according to the National Employment Law Project,” a CNBC report noted. “That means about 6.8 million Americans will start the year with higher wages, progressive think tank the Economic Policy Institute estimates.”

More local governments are supporting initiatives to increase the minimum wage rate with help from campaigns like the Fight for $15, which seeks to raise wages for fast food workers—a movement that was first launched in New York City in 2012.

“It shows the incredible momentum that the Fight for $15 movement has built up,” Yannet Lathrop, policy analyst with NELP and the report’s author, said in a statement. “Local communities all around the country strongly support raising the minimum wage, because people see their friends, neighbors or themselves working hard but not getting ahead.”

Trading U.S. Equity Strength or Weakness

Can higher wages translate to strength for U.S. equities moving forward? Forecasting strength in U.S. equities creates an opportunity for investors to capitalize on the Direxion FTSE Russell US Over International ETF (NYSEArca: RWUI).

RWUI offers investors the ability to benefit not only from domestic U.S. markets potentially performing well but from their outperformance compared to international markets.

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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