Global Assets Strengthen as Anxieties Fade and U.S. Dollar Weakens

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Global assets have advanced into year end as events and data turn more positive.

Emerging markets, metals and energy have all outperformed the S&P 500 in the last month. That marks a sharp change from most of 2019, when investors worried about a global recession and geopolitical risk.

At least four things have taken place. In each case, sentiment seems to be flipping from anxiety and fear toward optimism and hope.

  1. China: Each day seems to bring another headline confirming that Washington and Beijing have ended their trade war — at least for now.
  2. Brexit: Boris Johnson’s decisive victory on December 12 lays the groundwork for the U.K. to leave the European Union at the end of January. While investors didn’t like the idea of Brexit three years ago, they like the idea of it ending soon. Pretty much anything is better than uncertainty.
  3. The U.S. Federal Reserve wants to boost inflation with low interest rates. That can reduce the value of the U.S. dollar and make investors want to own foreign stocks, along with commodities like oil and gold.
  4. Recent headlines from Germany suggest that Europe’s economic engine is recovering. That includes data from its Ifo Institute on December 12 and 18, its ZEW Index on December 10 and its Economy Ministry on December 16.
U.S. Dollar Index (@DX) with 50- and 200-day moving averages.
U.S. Dollar Index (@DX) with 50- and 200-day moving averages.

Five Busiest Global Stocks and ETFs

The global theme has been out of favor since about 2013, so readers may have forgotten its important stocks and exchange-traded funds (ETFs). So let’s review some of the most active.

The EasyLanguage code below is an indicator calculating the average value traded in the last 10 sessions.

Plot1(AverageFC(close*volume,10));

We added it as a criterion on TradeStation’s Scanner. These were the top five global results:

  1. iShares Emerging Market ETF (EEM) is one of the busiest symbols in the entire market, averaging more than $3 billion of daily turnover. More than one-third of its portfolio is focused on China.
  2. Alibaba (BABA), the Chinese e-commerce giant, is the biggest holding in EEM. It also quietly broke out to new all-time highs this week.
  3. iShares MSCI EAFE ETF (EFA) focuses on developed markets like Japan, Europe and Australia.
  4. Market Vectors Gold Miner ETF (GDX) tracks big gold miners. While most of its holdings are Canadian, the real catalyst for GDX is its inverse relationship to the U.S. dollar. A weaker greenback tends to lift gold prices and mining companies.
  5. iShares MSCI Brazil ETF (EWZ) tracks Latin America’s biggest economy. Aside from being global, Brazil’s also benefited from political changes and an emerging technology sector.

In conclusion, international markets have shown signs of a comeback. We don’t yet know if it will continue in 2020. But hopefully this post helps you get the New Year started.

RadarScreen® showing Average Value Traded and Average Options Volume for top global symbols.
RadarScreen® showing Average Value Traded and Average Options Volume for top global symbols.
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