Trade war pessimism and recession fears may be offering gloomy forecasts for U.S. equities in 2020, but global investment firm Goldman Sachs is painting a more positive picture. The firm is anticipating a stronger showing in a year that will be dominated by the presidential election.
“The equity market is anticipating an acceleration in US economic growth during the coming months,” said David Kostin, Goldman’s chief U.S. equity. “Investors who want to capture further cyclical upside can improve risk-reward by narrowing their focus to select cyclical stocks.”
The markets have been in flux on trade war news. At one point, a tangible U.S.-China trade deal appears to be close and then the next day, it seems like a deal is worlds away.
From an economical standpoint, Goldman Sachs dismisses the noise and sees tariffs having less of an impact on the economy.
“Our economists believe that tariffs have peaked and that the drag on US GDP attributable to the US-China trade war is now abating,” Kostin added. “Their base case is that tariff levels on imports from China remain flat in 2020.”
As U.S.-China trade deal negotiations were unraveling during the summer, yield curves inverting and investors were piling into bonds, recession talks were swirling in the capital markets. If more strength in U.S. equities is anticipated, the optimism from Goldman Sachs 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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