The Sequel: Market Resilience Defies October Tradition of Volatility

Monday, October 28, 2019 - US investors breathed a sigh of relief as we appear to have made it through the month without any significant bruises. Despite all the worrisome news headlines, US Equity and Global Markets climbed last week. The broad market as measured by the S&P 500 closed the week very close to its all-time high of 3,022.55. The NASDAQ 100, the proxy for the QQQ, hit new highs last week.  November and December are typically positive months for US Equity Markets and we appear to be heading that way. Traders should be aware that Google reports earnings on Monday to be followed by Facebook and Apple on Wednesday. These FAANG Stocks are critical to assess the direction of the leading indexes as they comprise a significant weighting in the benchmarks.

Foreign Markets like the German DAX and MSCI Emerging Markets Index sprang to life as well. All of this begs the question of whether recession fears are receding and are we at a new cycle of global growth?  The UK caught a break with an extension to negotiate their exit with the EU. Investors are betting on higher equity values with their money and we agree with them.

A number of themes caught our eye this week which we want to point out:

First, we sense that interest rates around the globe are bottoming and are set to reverse their course upward – but slowly. The governor of the Swedish Central Bank, the Riksbank, indicated that it is prepared to increase rates soon as negative rates induce negative economic outcomes and encourage risky behavior by investors seeking out higher yields. With Christine Legarde taking over the European Central Bank, we expect a push in Europe toward big spend fiscal policy. Keep in mind, given such low rates, a slight upward move can create significant dislocations in not just fixed income markets, but real estate, credit funds and other levered investments.

Looking around the world, we sense there is a general move by the G7 to reflate using fiscal policy given that monetary policy has reached its limits to support the real economy. Indeed with the masses increasingly protesting around the world (Argentina left populist wing, Chile, Hong Kong, JFK Airport workers, technology freelancers, various public teacher unions and the recently ended auto workers union to name a few) we expect politicians to take note and pursue fiscal policies to keep the “barbarians” at bay.

We also point out that this week, DAVOS in the Desert begins in Saudi Arabia. Of note is the session themes to see what is on the mind of the global elite – a number of disruptive technologies as well as Space which will have effects on global economies and labor markets.

All of this creates opportunities for traders and active investors who can use ETFs to take advantage of real-time market volatility – both up and down!  To take advantage of this, we suggest looking at our ETFG Weekly Select List.

We suggest keeping a mindful eye on tools like our Select List and Risk and Reward Ratings that can be used to evaluate the vast set of opportunities in the ETF marketplace. Today’s market realities require a new approach to macro investing, one in which individual investors now have access to tools via ETPs to customize risk and return profiles in their portfolios. Use our Scanner to find those funds.

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