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Don’t “Sell America”… Buy the World
Don’t “Sell America”… Buy the World
BY MICHAEL SALVATORE, EDITOR, TRADESMITH DAILY
In This Digest:
- The most important chart for investors right now
- It’s not “Sell America,” it’s “Buy the World”
- Amazon’s AI “killer app” is not like any other
Investors are “selling America”…
After decades of the U.S. sitting at the center of global finance—strong dollar, deep markets, safe-haven status—capital is starting to leak out.
The chart below says it all…
It’s of the U.S. Dollar Index, which measures the exchange rate of the dollar versus overseas currencies.
What you’re looking at is the worst 12-month drop since 2011.
That matters because currencies don’t usually move like this. When the dollar drops this fast, it’s usually telling you something about global capital flows.
What you’re seeing is investors reducing exposure to dollar-based assets – everything from the currency itself to U.S. stocks and Treasurys – and reallocating toward assets overseas.
There isn’t a single cause. It’s a pile-up.
U.S. interest rates are no longer dramatically higher than the rest of the world’s. Federal deficits are swelling again. Washington looks politically fragile. And after a decade-plus of U.S. markets outperforming nearly everything else, global investors are doing what they always do eventually: rebalancing.
None of this means America is “finished.” But it does mean that just investing in U.S. markets and avoiding opportunities overseas is becoming more costly.
But what overseas markets are the best places to diversify?
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Let’s use TradeSmith’s tools to find answers…
The iShares Core Europe ETF (IEUR) tracks the largest stocks trading in Germany, the U.K., France, and 12 other stock markets in European countries.
It’s up more than 34% over the past 12 months, more than double the 16% gain in the S&P 500:
And it’s up 21% since it flashed a new Short-Term Health Buy signal on May 6 (the green bar at the bottom of the chart).
Short-Term Health is one of TradeSmith’s newest trading indicators. It’s a shorter-term spin on our classic Long-Term Health indicator, designed to catch new uptrends quickly and escape downtrends before they worsen.
As long as a stock is green on its Short-Term Health indicator, it’s in a strong uptrend, and we consider it a buy. Europe is a buy right now.
Another hot region is Latin America. The recent U.S. involvement in Venezuela has put a spotlight on the South American continent. And even before then, many of its markets have sprung to life.
The iShares Latin America 40 ETF – which tracks 40 of the largest countries in Latin America – is up 72% over the last year:
Our Short-Term Health signal also caught the bulk of that move, with the most recent signal firing on Aug. 15 before a 45% rise.
Asia is booming, too. The iShares Asia 50 ETF, tracking the largest 50 companies across Asia, is up 67% over the past year:
Here again, the Short-Term Health signal that fired on Jan. 2 caught a rapid 11% move in the ETF.
And there are some even better opportunities in smaller, less well-known markets…
Here are the top five country ETFs for your watchlist…
I put together a list of country ETFs and sorted them by most recent Short-Term Health Green signal. This will surface the most recent high-momentum upside moves.
At the top aren’t European ETFs, but countries across Asia:
Qatar (QAT), China (FXI), the Philippines (EPHE), Singapore (EWS), and Australia (EWA) have all flashed new Short-Term Health Buy signals over the last few weeks.
These markets have outpaced the U.S. over the past month. And all but QAT and EPHE beat U.S. stocks over the past year.
If the “Sell America” trend continues, healthy diversification – especially to countries that are sporting fresher buy signals – is a smart move.
Of course, that doesn’t mean abandoning U.S. stocks altogether. “Sell America” makes for a great headline. But there are still plenty of American opportunities.
One we like a lot right now is Amazon…
For all Amazon’s spending on AI (an estimated $75 billion last year), it hasn’t found its “killer AI app.”
Think OpenAI’s ChatGPT, Google’s Gemini, or Microsoft’s Copilot.
Amazon has its Rufus shopping assistant. It summarizes reviews, answers basic questions, and nudges shoppers toward a purchase with less friction.
Helpful, but hardly a game changer.
But that doesn’t mean Amazon isn’t an AI powerhouse. It is. Just in a less conspicuous way than its competitors.
Amazon has spent years embedding AI into the least glamorous but most important parts of its business: warehouses, logistics, and fulfillment.
More than 1 million AI-assisted robots now work inside Amazon facilities as part of its DeepFleet system. We’re not talking about automated arms on a conveyor belt. They’re fully mobile systems that, while looking a lot like a Roomba, have taken on a huge amount of warehouse work.
AI models forecast which products should sit in which warehouse, often days in advance. Computer vision systems scan items for damage before they ever reach a box. Algorithms decide the smallest possible package for each order, cutting waste and shipping costs at the same time.
This means it can fulfill its products at lower costs with fewer human warehouse workers.
And the company is shrinking its white-collar workforce. This week, it announced it was cutting 16,000 employees from its corporate divisions. Amazon claims this has nothing to do with AI… but it sure is interesting timing.
And it’s not just Amazon’s margins that are looking healthy. Its short-term momentum is, too.
Amazon’s Short-Term Health Is Green…
It flashed a new Short-Term Health Buy signal back on Jan. 7. Since then, the stock is trading right where it was the day the signal fired.
It’s one of only two Mag 7 stocks in the green right now. The other is Google (GOOGL), which has been in the green since June 30.
This recent news, coupled with the company’s AI prospects, could suggest Amazon is one of the better buys of the group.
To building wealth beyond measure,
Michael Salvatore
Editor, TradeSmith Daily
Disclosure: Michael Salvatore holds shares of Alphabet (GOOGL) at the time of this writing.
