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IMF: Global Growth Will Decline to Lowest Level Since Financial Crisis Due to Trade War

This article was originally published on ETFTrends.com.

Investors aren't the only ones looking closely at the U.S.-China trade war as the world authority on finances, the International Monetary Fund (IMF), is keeping a close watch on negotiations. If the trade war remains unresolved, the IMF is predicting that global growth will decline to its lowest level since the financial crisis in 2008.

Per the IMF's most recent World Economic Outlook projection, it reveals that 2019 GDP will grow at a rate of 3.0%, which is less than the 3.2% projection in July. This doesn't bode well for the IMF's new managing director Kristalina Georgieva who will need to tackle a bevy of economic issues.

Per a CNBC report, the IMF said "that by 2020, announced tariffs would reduce global economic output by 0.8%. Georgieva said last week that this translates to a loss of $700 billion, or the equivalent of making Switzerland’s economy disappear."

“The weakness in growth is driven by a sharp deterioration in manufacturing activity and global trade, with higher tariffs and prolonged trade policy uncertainty damaging investment and demand for capital goods,” IMF Chief Economist Gita Gopinath said in a statement.

IMF’s World Economic Outlook, Oct 2019

Will the U.S. be better able to mute the effects of slower global growth versus international equities? The  Direxion FTSE Russell US Over International ETF (RWUI) offers investors 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”).

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.

On the other side, the Direxion FTSE International Over US ETF (RWIU)  gives investors the opportunity to capitalize on their hunch that international equities will outdo U.S. equities. As for the fund, RWIU seeks investment results, before fees and expenses, that track the FTSE All-World ex US/Russell 1000 150/50 Net Spread Index. The FTSE All-World ex US/Russell 1000® 150/50 Net Spread Index (R1AWXUNC) measures the performance of a portfolio that has 150 percent long exposure to the FTSE All-World ex US Index and 50 percent short exposure to the Russell 1000® Index.

For more relative market trends, visit our Relative Value Channel.

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