In an effort to contain the coronavirus outbreak, the World Health Organization deemed the virus a global health emergency, which comes after the U.S. confirmed its first case of human-to-human transmission. This virus has already killed as many as 170 people in China, and has spread to 18 countries.
“Over the past few weeks we have witnessed the emergence of a previously unknown pathogen that has escalated into an unprecedented outbreak,” WHO Director-General Tedros Adhanom Ghebreyesus said during a press conference at the organization’s Geneva headquarters on Thursday. “We must act together now to limit the spread.”
“To the people of China and to all of those around the world who have been affected by this outbreak, we want you to know that the world stands with you,” Tedros added. “We must remember that these are people, not numbers.
As for the global effects the virus has had thus far, a CNBC report noted that “since emerging less than a month ago in Wuhan, China, the coronavirus has infected more people than the 2003 SARS epidemic, which sickened roughly 8,100 people across the globe over nine months. As of Thursday, there are at least eight cases in four countries, outside of China, of human-to-human transmission of the new coronavirus.”
The virus has already infected the capital markets with volatility since it first broke news. As more information regarding the virus makes headlines, the markets have been reacting as such, giving investors a rollercoaster ride.
Will the latest announcement by WHO spur a sustained move into defensive equities?
If investors believe that U.S. defensive sectors will outperform cyclical sectors, the Direxion MSCI Defensives Over Cyclicals ETF (NYSEArca: RWDC) provides a means to not only see defensive sectors perform well, but a way to capitalize on their outperformance compared to cyclical sectors.
RWDC seeks investment results that track the MSCI USA Defensive Sectors – USA Cyclical Sectors 150/50 Return Spread Index. The Index measures the performance of a portfolio that has 150% long exposure to the MSCI USA Defensive Sectors Index (the “Long Component”) and 50% short exposure to the MSCI USA Cyclical Sectors Index (the “Short Component”).
On the other side of the trade,for investors looking for continued upside in U.S. cyclical sectors over defensive sectors, the Direxion MSCI Cyclicals Over Defensives ETF (NYSEArca: RWCD) offers them the ability to benefit not only from cyclical sectors potentially performing well, but from their outperformance compared to defensive sectors.
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