If investors can deal with the temporary pain now, it sets them up nicely for some future gains down the road, particularly for U.S. equities–of course the question at this point is when? Market experts like Dubravko Lakos-Bujas, chief U.S. equity strategist at JPMorgan, posits that the stock market can recover from the steep drop-off to record highs early next year.
Per a recent CNBC report, Lakos-Bujas said that “he expects the S&P 500 to reach 3,400 in early 2021. That would top an all-time high of 3,386 set on Feb. 19. It is also 47% higher than the broad market average’s Friday close of 2,304.92.”
March 12 marked the official end of the extended bull market that saw many U.S. equities reach record highs, probably making some investors too exuberant in the market. Of course, their resolve has been well-tested since the coronavirus outbreak has been infecting the capital markets with a wave of panic-selling.
“Acknowledging that equity markets globally are now down 30-50% from their recent highs and that investor positioning has become increasingly favorable, we see an asymmetrical return profile for equities with upside significantly higher than downside over the next year,” wrote Dubravko Lakos-Bujas.
Investors are eagerly anticipating whether a federal stimulus package will help resuscitate the markets back to life. Some of the ideas being floated include payments to Americans and bailout for hard-hit industries like airlines.
“Aggressive fiscal policy needs to be undertaken immediately,” Lakos-Bujas said, noting that failure to pass such measures “would likely result in a broader capitulation of equities including the heavyweight momentum stocks.”
A Relative Strength Play in U.S. Equities
If the equities market can resume its trajectory before the coronavirus outbreak, 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.
- 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”).
For more relative market trends, visit our Relative Value Channel.