U.S. equities were lifted on Thursday thanks to a “phase one” trade deal agreed to in principle between the U.S. and China after it looked like trade talks could be prolonged and even stretch through 2020. Looking forward, can this “phase one” deal continue to propel U.S. equities through the new year?
Per a CNN report, “The terms of the agreement include a delay in new tariffs on $160 billion in Chinese-made consumer electronics and toys scheduled to go into effect December 15, as well as a reduction by half of some existing US tariffs, said a second person familiar with the deal. In exchange, China has promised to purchase US agricultural products. China has made similar pledges in past negotiations, but has mostly failed to follow through on large purchases.”
“The key point is that we’re in a world of binary outcomes,” Fabiana Fedeli, head of fundamental equities at Robeco, told CNN Business. “Will we have an escalation of the trade war, or not?”
“If you ask me, compared to maybe two months ago, I’m a little more certain there will be some sort of deal,” Fedeli added. But in the age of tweeting politicians “the fundamentals can change with 140 characters.”
ETF investors can play the latest trade news on a macro level with the Direxion FTSE Russell US Over International ETF (NYSEArca: RWUI), particularly if they sense continued strength in U.S. equities over international equities.
- 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 of the trade 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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