With 2019 headed for a curtain call, investors are still keeping their eyes fixated on a U.S.-China trade deal, which could sway the tide for U.S. equities. In the meantime, investors can bank on a move higher before the end of the year via relative value ETFs.
December 15, in particular, will be closely watch as the proposed deadline for a “phase one” deal agreed upon by the U.S. and China in October. New tariffs are supposed to kick in on China goods after this deadline date, but various reports say that both nations agreed to withhold further tariffs until an agreement is reached.
“It’s nothing official yet. That’s the thing,” said Quincy Krosby, chief market strategist at Prudential Financial. “Market participants are so used to headlines turn out to not be true that they are waiting to see what will be confirmed by administration officials.”
In the meantime, investors are also eyeing the actions of the Fed who will conclude their last two-day policy meeting for 2019. The expectation is that the central bank will hold rates steady following three consecutive rate cuts, but economic data could change that decision.
“We still expect the pressure to be on the Fed for lower not higher [rate], but clearly Friday’s employment number has that bar for more cuts very high,” said Gregory Faranello, head of U.S. rates trading at AmeriVet Securities, in a note. “In many ways, the bar for hikes even higher.”
All this 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 tracks 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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