Seismic shifts in the geopolitical sphere filled many investors with dread at the end of 2016. These concerns would turn out to be unfounded, as 2017 saw perhaps the strongest single year of growth in the global economy since the Great Recession.
This growth would slow markedly in 2018, and now investors are starting to see some of these risks bubble to the surface.
The iShares Core MSCI All Country World ex-Canada ETF (TSX:XAW) fell 1.71% to close out the week on March 22. The ETF aims to offer a low cost and simple way to own US, international, and emerging market stocks. It has climbed 8.5% in 2019 so far. The ETF boasts most of its weighting in financials, which explains the most recent dip.
U.S. and global stocks reacted violently as the interest rate on the U.S. Treasury 10-year bond fell below the rate on the 3-month bill in response to the Fed’s dovish March announcement.
The yield curve inversion implies a 25-30% probability of recession in a 12-month view. This prediction has a very solid track record, which should concern investors as the global economy has only become more intertwined since 2008-2009.
The ETF has more than made up its losses from 2018. Markets across the world, including in the United States, are showing signs of overvaluation. Investors should wait on the sidelines for a better price point before scooping up this ETF today.
Those who are holding should consider taking profits in the early spring.
