American markets are down again today, but you know who’s doing worse? Everyone else in the world
Waverly Advisors has been banging the drum for a while saying that the way to make money is to go long SPY (The S&P 500 ETF) and short EAFE (the big cap ETF from the rest of the world).
“Still Going Strong: The SPY/EFA spread, a position we have held since last summer, extended gains yesterday and is now close to making new highs. We expect additional volatility in this spread, based both on headline and technical factors, but anticipate near-term direction will continue to be in favour of the trade. In this instance our tactical and macro views are strongly aligned: Resilient corporate earnings in the US combined with an increasing likelihood of some form of QE3 in response to softening employment recovery suggests relative strength for domestic equities while the train wreck in Europe continues and commodity export-centric markets feel moderating Chinese demand.”