If you'd like to ramp up exposure to U.S. growth accelerating, guess what? You can now buy it on sale. That's right, data on Retail Sales, Consumer Confidence, ISM Manufacturing, and S&P 500 earnings are all heating up. Meanwhile, the Russell 2000 fell -2% last week. As a pure play on the U.S economy accelerating, we suggest you buy it.
(Click here to read a brief primer on our U.S. economic growth call.)
How To Play U.S. Growth Accelerating? Buy the Russell 2000
$IWM #SmallCaps #GrowthAccelerating
The reasoning is fairly simple. The companies inside the Russell 2000 generate less than 20% of sales outside the U.S. By way of contrast, larger-cap S&P 500 companies generate nearly a third of revenues abroad. In other words, the Russell 2000 is more heavily levered to U.S. economic growth. It's also why the index is up +12% in the last six months.
There's another reason to like the Russell 2000: Wall Street consensus is short.
As you can see in the Chart of the Day below, the CFTC's latest data on institutional investor positioning in futures and options markets reveals "a spanking brand new net SHORT position in the Russell 2000 of -10,317 contracts (after getting -31,761 contracts SHORTER) last week," writes Hedgeye CEO Keith McCullough in today's Early Look. (A net negative number of contracts indicates Wall Street consensus is short.)
Bottom Line: It's simple... U.S. growth is accelerating. We think Wall Street's mounting short position is misguided. So buy the dip in the Russell 2000.