As U.S.-China trade deal negotiations were unraveling, yield curves inverting and investors were piling into bonds, it didn’t seem long ago that recession talks were swirling in the capital markets. What a difference a season makes–fall arrives and now U.S. equities are extending their gains with the S&P 500 reaching a new high.
Some analysts feel investors can sense that the good times are fleeting, but the market could be saying something else.
“Investors likely remain too skeptical on the impact of Brexit, the U.S.-China trade talks and the impeachment hearings. They’re too skeptical that the market can advance,” said Sam Stovall, chief investment strategist at CFRA. “I think November and December are pretty much going to buck the emotional trend right now. The market is telling us it wants to go higher.”
“This will be the 31st consecutive quarter in which actuals exceed estimates, but as much as earnings are coming in better for the quarter, they’re going down in terms of Q4 and 2020. That’s not good,” Stovall added. “I think because the market is doing so well, it might be telling us we’re underestimating forward growth. Prices lead fundamentals.”
A Relative ETF Opportunity for U.S. Equities
The major U.S. indexes are feeling the good vibrations in the markets with third-quarter earnings coming out better-than-expected for the most part and now, a U.S.-China trade deal that could be finalizing. All this creates an opportunity for investors to capitalize on the Direxion FTSE Russell US Over International ETF (NYSEArca: RWUI).
- 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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