US Equities Are the Place to be in Relative Value ETFs

Relative Value Investing Channel

Worries of slowing global growth and inverting yield curves haven’t slowed down the U.S. For investors who are worried that U.S.-China trade wars will feed into more weakness for U.S. equities, they can feel at ease knowing that when it comes to relative value ETFs, the United States is still the place to be.

“While small caps remain a pocket of relative weakness within the U.S. equity markets, it is hard to ignore how dominant U.S. stocks have been relative to international stocks,” Direxion Investments said in their latest Relative Weight Spotlight. “On a year-to-date basis, the U.S. has outperformed by 9.53%. In fact, on almost every trailing monthly basis going back to 2016, the U.S. has outperformed international stocks. While classic valuation metrics may be signaling for a rotation towards international exposures, we continue to believe that the current macroeconomic environment supports for this trend to continue.”

The month of August was a challenging environment for most equities, but compare say emerging markets to U.S. equities, and investors will see that they were better off sticking with the red, white and blue.

Emerging Market Outflows

“Broad U.S. ETFs saw net redemptions of $3.938B, lagging broad international ETFs (+ $0.753B) by $4.691B, which was just the third such occurrence over the last 12 months,” the Relative Weight Spotlight post added. “While the outflows for emerging markets ETFs is not new, August saw the single largest (by almost $3B) monthly outflow over the last 12 months. The year-to-date positioning leadership in emerging markets relative to development markets has now disappeared.”

For investors who may be sensing continued upside in U.S. equities over international equities, the Direxion FTSE Russell US Over International ETF (RWUI) offers them 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”).

For investors sensing continued upside in U.S. equities over international equities, RWUI offers them the ability to benefit not only from domestic U.S. markets potentially performing well, but from their outperformance compared to international markets.

This article originally appeared on ETFTrends.com

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