ETF update from Forefront Advisory
Update from ETF masters-of-the-universe Dan Weiskopf & Dan Faucetta at Forefront Advisory : The U.S. jobs data report from Friday, August 6, reminded investors that this recovery has just begun and is still very much fragile. Investors that are optimistic about the global recovery should look at investing in small cap equities. However, investors who are looking to capture the potential short term move in the equity markets should be looking overseas. They see various signals in their ETF work that indicate risk capital is moving towards small caps and international growth. Historically, small-cap equities outperform large cap when coming out of a recession due to optimism about economic strength, leading to a rebound in business and oversold conditions offering a springboard in valuations. However, since global growth is difficult to estimate at this point in the cycle and valuations are materially less compelling at this point in time their expectations are that small cap outperformance should be viewed mostly as a “beta” play if risk assets are coming back in favor. The bottom line is that they believe that investors who are frustrated by low interest rates are incentivized to take risk and strong demographic trends in Brazil (BRF- $50.25), and the emerging markets (DGS- $46.20 and EWX -$51) make for favorable risk/reward scenarios both long term as well as in the short term.