5 Unknown “Falling Knives” ETPs that will Outperform the Market within 5 years

The title is obviously a clickbait, especially knowing that 92% of professional funds managers cannot outperform the S&P 500 in the long run. This is not a financial advice.

I do not only invest in Crypto but also in more traditional Stocks and ETPs, mainly because of:

• Risk Diversification: some Stocks/ETPs have low correlation rate with Crypto market
• Lower volatility
• More linked to Macro events: more intellectually enriching to invest according to geopolitical & macroeconomic events

I own the traditional mix of Dividend Stocks + Growth Stocks + Composite indexes but I will not develop these ones, because there are people much more competent than me & it’s quite boring.

I will rather give you 5 falling knives (= experienced a sharp drop) ETPs that may have a good potential (= overperforming S&P 500 and STOXX 50) on the long run (= on a 5 years investment horizon).

Moreover, they are UCITS compliant, which mean available to retail investors through most brokers in the EU (and God knows how complicated it is to find fancy UCITS ETPs !).

Obviously, these products are generally more volatile than stocks indexes and should represent a small percentage of your overall portfolio.

1/ TLT5 : x5 Leverage US 20 Years Treasury

Chart of the 20 Years US Treasury Bonds Value, 1W (TLT5 has the same price action with leveraged)

• Summary of the ETP: Here
• What: “The objective of the ETP Securities is to provide 5 times the value of the daily performance of the iShares 20+ Year Treasury Bond ETF” (As the Bond Market is not very volatile, a leveraged position is more interesting)
• Why it’s a falling knife: The FED has raised interest rates to fight inflation, leading to a crash in the Bond Market (More explanation on the inverse correlation between Interest Rate and Treasury bond value here and here)
• Why it’s gonna change: US economy is experiencing a decreasing inflation despite some volatility, moreover some risks (Rising interest on National debt, concern on potential recession…) are paving the way for a first decrease in the Fund rates for 2024
• When it’s gonna change: The market is pricing a first decrease in the Fund rates for June 2024
• When to enter: Some volatility can be expected in 2024 but now is a good entry.

2/ PASI: China Stock Market Index

PASI Chart, 1W which represents an UCITS version of MSCI China index

• Summary of the ETP: Here
• What: “the MSCI China ESG Leaders Index consists of Large and Mid cap companies in Chinese markets”
• Why it’s a falling knife: Chinese economy has experienced several challenges since 2021: ongoing Zero-COVID policies, real estate crisis with the fall of Evergrande, debt crisis in local Governments, regulatory crackdowns on “BATX”, partial withdrawal of EU & US investments in the context of USA-China tensions, customs tariffs in the US, overproduction crisis caused by lower external demand…
• Why it’s gonna change: Chinese Government has launched many policies and rules to try to solve internal crisis. External demand is starting to grow again after a low-growth global GDP in 2022 and 2023. Moreover, Chinese companies are still making lot of revenues and the PERs (only 8!) are much lower compared to Western markets. However, EU & US investments seem to not come-back.
• When it’s gonna change: That’s the $1M question as the equation has many unknowns. However it seems quite a safe bet to say that Chinese markets already hit the bottom or will hit the bottom not later than Q2/Q3–2024.
• When to enter: Chart analysis does not demonstrate strong signs of reversal in the bearish trend yet. It seems safer to wait few months to observe chartist + fundamental bullish reversal before buying.

3/ DXS7: Vietnam Stock Market Index

DXS7 Chart, 1W

• Summary of the ETP: Here
• What: “The FTSE Vietnam Index aims to reflect the performance of the (…) Vietnamese blue chip companies listed on the Ho Chi Minh Stock Exchange”
• Why it’s a falling knife: Vietnam stock market is correlated with Chinese stock market as China is the main economic partner of Vietnam (There is more trade between Vietnam and China than Russia or Germany with China). Moreover the GDP growth was below expectations in 2023.
• Why it’s gonna change: Vietnam economy is still strong and growing despite China economic issues, moreover its stock market is not under the spotlights compared to other emergent countries such as India which is in ATH (Around 15 PER for Vietnam VS 25 PER for India). Moreover they benefit from external investments by Chinese companies who relocate production in the country to avoid the risks previously mentioned in 2/.
• When it’s gonna change: Chart analysis shows a beautiful double bottom in 2023 after the 2022 crash, demonstrating a potential price action reversal. Moreover, the GDP growth in 2024 is expected at an impressive 5.8% according to IMF.
• When to enter: The trend reversal needs to be confirmed, especially by better macro perspectives in China. However, now is a quite safe bet in a long run perspective.

4/ REMX : Rare Earth & Strategic Metals

• Summary of the ETP: Here
• What: “The MVIS® Global Rare Earth/Strategic Metals Index (MVREMX) tracks the performance of the largest and most liquid companies in the global rare earth and strategic metals industry”
• Why it’s a falling knife: Covid shock has led to lower supply (less production + higher transportation costs) and higher speculative demand, so a bubble appeared (+410% between 2020 and 2022 !). Every bubble must burst, and REMX experienced a -63% between 2022 and 2024, caused by lower expected demand on EVs and post-Covid overproduction.
• Why it’s gonna change: The bubble continues to deflate and prices seem to reach the 2020 lows. A trend reversal will need to be backed by a renewal in demand, which is currently not obvious, as EU show less ambition in EV transition and Trump is likely to win elections. However, demand will almost certainly increase in a long-term perspective.
• When it’s gonna change: We must observe the price action at 2020 lows, which could be reached in 2024. Then Macro perspectives in EU and US elections will give a trend for the next months/years.
• When to enter: An entry at 2020 ATL (around $25) could be interesting to play as a Trader more than an Investor. Otherwise, it’s wiser to wait the end of the 2024 to see more clearly the macro & political perspectives.

5/ AIGI: Industrial Metals

AIGI Chart, 1W which represents an UCITS version of WisdomTree Industrial Metals

• Summary of the ETP: Here
• What: “WisdomTree Industrial Metals is (…) designed to provide investors with a total return exposure to a basket of Industrial Metals futures contracts.”
• Why it’s a falling knife: Industrial Metals have more or less followed the same path than Rare Earth & Strategic Metals, with less volatility and more influence by Russia/Ukraine war.
• Why it’s gonna change: The bubble continues to burst, however the price action seem to demonstrate more resistance and prices will probably not reach the 2020 lows. A bounce-back of GDP growth in 2024 coupled with ongoing geopolitical tensions could stabilize or even reverse the bearish trend.
• When it’s gonna change: Chart analysis shows a strong support line around 12.5, demonstrating a price stabilization. Global macro & geopolitical perspectives will probably give a trend direction end of 2024.
• When to enter: The trend reversal needs to be confirmed, especially by better macro perspectives. However, now is a quite safe bet in a long run perspective.