Over the past decade and a half, US equities have been the dominant force in the investment world. Particularly large-cap tech stocks have seen impressive growth, with the Nasdaq and S&P 500 outpacing international markets. While the U.S. dollar enjoyed a robust 2022, the winds of change are beginning to blow in favor of international equities.
Chances of a less-hawkish Fed this year, the ebbing pandemic and economic improvement in other parts of the globe and strength in those currencies led the greenback to lose its appeal to some extent this year. Invesco DB US Dollar Index Bullish Fund UUP has added about 2% this year.
The Changing Tides: International Stocks Poised for a Comeback
After years of lagging, international stocks show signs of a comeback. Rapid changes in the global economy, the receding effects of pandemic coupled with shifting monetary policies are setting the stage for a resurgence.
Why Europe ETFs May Be Better Bets Than U.S.
Europe investing has outperformed the United States in the initial phase of 2023. Cheaper valuation, upbeat corporate earnings, a more resilient economy and still-lower interest rates in Europe than United States have led to the rally. The continent’s markets have shown impressive trajectory in the first quarter of this year, and the trend has continued into the second quarter of the year.
The pan-European Stoxx 600 index is hovering around a 14-month high. Banks seemed to have subsided the latest failure worry with the Deutsche bank and Barclays having reported decent results in the latest reporting season. Mining stocks are also in sweet spot after one of the biggest consumers – the China’s economy – has reopened (read: Why Europe ETFs May Be Better Bets Than U.S.).
Emergence of Emerging Markets
Investors typically diversify with allocations in both developed and emerging markets. Notably, emerging markets have trailed behind their U.S. counterparts over the past decade. Yet, with regulatory changes and improved transparency, particularly in Chinese accounting practices, emerging markets are gaining traction.
Some other economies like Greece. Nigeria and Saudi Arabia have been rallying due to their country-specific reasons. Notably, higher inflation and the commodity market rally have proved to be favorable for this bloc.
Against this backdrop, below, we highlight a few winning international ETFs of this year. These ETFs have beaten the SPDR S&P 500 ETF Trust SPY (up 10% this year).
ETFs in Focus
iShares MSCI EAFE Growth ETF EFG – Up 14.8%
WisdomTree International Hedged Quality Dividend Growth Fund IHDG – Up 14.3%
SPDR S&P Emerging Markets Dividend ETF EDIV – Up 17.8%
iShares Currency Hedged MSCI EAFE ETF HEFA – Up 13.5%
iShares ESG Aware MSCI EAFE ETF ESGD – Up 11.9%
Bottom Line
While home-grown equities have shown extraordinary performance, the tables appear to be turning in favor of international stocks. Whether you’re an experienced investor or a newcomer, now may be the perfect time to consider diversifying your portfolio to capture the potential upswing in global markets.
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SPDR S&P 500 ETF (SPY): ETF Research Reports
Invesco DB US Dollar Index Bullish ETF (UUP): ETF Research Reports
SPDR S&P Emerging Markets Dividend ETF (EDIV): ETF Research Reports
iShares ESG Aware MSCI EAFE ETF (ESGD): ETF Research Reports
iShares Currency Hedged MSCI EAFE ETF (HEFA): ETF Research Reports
WisdomTree International Hedged Quality Dividend Growth ETF (IHDG): ETF Research Reports
iShares MSCI EAFE Growth ETF (EFG): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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