Market Overview

As Emerging Markets Struggle, 2 Countries Make Their Claim

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As tariffs, sanctions, and politics continue to coalesce into a shadow of uncertainty hanging overhead, the markets haven’t blinked—at least not the US markets. The S&P 500 Index is hovering around all-time highs, and the Q2 earnings season was a rousing success across the board.

But that strength hasn’t spread across the globe. A myriad of headlines, Brexit ramifications, crisis in Turkey and Venezuela to name a few, have weighed heavily on the global markets.

Take a look at the Direxion Daily MSCI Emerging Markets Bull 3X Shares ETF (NYSE: EDC), the triple-leveraged bullish ETF for the emerging markets. It’s down 21 percent in the last three months as of this writing, as its counterpart, the Direxion Daily MSCI Emerging Markets Bear 3X Shares ETF (NYSE: EDZ), is trading flat with four times as many inflows.

Source: Yahoo Finance

But while the emerging markets as a whole have struggled to find their way in 2018, other country-specific emerging market funds have quietly risen higher.

After bottoming out at the end of June to a low of about $68, the Direxion Daily MSCI India Bull 3X Shares (INDL) has since rallied back 26 percent in the succeeding 8 weeks.

India

The recent surge stems from a few causes, including ongoing negotiations with the U.S. after postponing some retaliatory tariffs and a drop in cost of crude; a commodity that India is also increasingly turning to America for in the face of new sanctions on Iranian oil. However, what’s truly driven price action in the MSCI India Index (NDEUSIA) is a rash of stellar financial reports from the country’s leading public sector banks and energy companies, bolstering some of the index’s largest holdings in those industries.

Mexico

Since the election of incoming social-democrat president Andres Manuel Lopez Obrador, Mexico’s broad market index has skyrocketed by 40 percent, and the Direxion Daily MSCI Mexico Bull 3X Shares ETF (NYSE: MEXX) has rallied 53 percent.

Part of this enthusiasm for the new administration is a seeming fondness developing between President-elect Obrador and U.S. President Donald Trump, something that, as of Monday, has resulted in an overhaul of NAFTA for the two nations.

Other than signs of a blooming presidential friendship and a stable, though not stellar, economy, Mexico has actually not had strong catalysts supporting some of the enthusiasm that struck its market following the July first election results. And, with the real risk of President Trump instating tariffs on auto imports in his hard-line approach to trade negotiations and Obrador’s reluctance to open up the country’s oil industry to private investment, traders eyeing a broad Mexico index should stay abreast of the country’s diminished, 2 percent growth outlook for coming quarters.

Source: Yahoo Finance

 

Investing in a Direxion Shares ETF may be more volatile than investing in broadly diversified funds. The use of leverage by a Fund increases the risk to the Fund. The Direxion Shares ETFs are not suitable for all investors and should be utilized only by sophisticated investors who understand leverage risk, consequences of seeking daily leveraged, or daily inverse leveraged, investment results and intend to actively monitor and manage their investment. These leveraged ETFs seek a return that is 300% or -300% of the return of their benchmark index for a single day. The funds should not be expected to provide three times or negative three times the return of the benchmark’s cumulative return for periods greater than a day.

An investment in the ETFs involves risk, including the possible loss of principal. The ETFs are non-diversified and include risks associated with concentration that results from the Fund's investments in a particular industry or sector which can increase volatility. The use of derivatives such as futures contracts, forward contracts, options and swaps are subject to market risks that may cause their price to fluctuate over time. The Funds do not attempt to, and should not be expected to, provide returns which are a multiple of the return of their respective index for periods other than a single day. For other risks including leverage, correlation, compounding, market volatility and specific risks regarding each sector, please read the prospectus.

An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476- 7523 or visit our website at direxioninvestments.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.  
 

Posted-In: Government News Emerging Markets Specialty ETFs Emerging Market ETFs Politics Markets ETFs

 

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