The First New Trump ETF? Not Quite

February 13, 2017

I won’t pretend to know the motivation of an ETF issuer when it comes to investment theses behind new products, but the timing of last week’s new global-ex Mexico ETF launch is tremendous, or maybe sad. Or maybe it’s just coincidental timing.

My perception of the WisdomTree Global ex-Mexico Equity Fund (XMX) that was launched last Friday is splintered, that is on the surface.

You could perceive this to be a play on Donald’s Trump presidential victory and his antagonistic economic and immigration stance against Mexico. We all know that since the prospect of Trump’s presidential reality landed, the peso has taken more hits than Julio Cesar Chavez.

For an ETF perspective, the iShares MSCI Mexico Capped ETF (EWW), a market-cap-weighted index of Mexico equities, is down more than 8% since Trump was nominated as the Republican candidate for president back on July 19. Since the outcome of the election was clear, in early November, the fund has declined more than 11%.

But what’s interesting is that the Vanguard Total World Stock Index Fund (VT)—a global equity ETF with less than 0.5% allocated to Mexico—is up about 8% during that same period, as is the iShares MSCI ACWI ETF (ACWI), which has only 0.385% tied to Mexico equities.

These allocations are extremely small, so don’t blame Mexico for any perceived drag on ACWI or VT.

Performance of EWW, ACWI & VT Since July 19, 2016

Why This Is Not A Designed Trump Play

Launching under the context of Trump’s first month in the office—yes, it has not been a month yet—the “perception is stronger than reality” notion hovers over the WisdomTree Global ex-Mexico Equity Fund (XMX) like the morning fog over Pebble Beach.

But the fact is that for an ETF issuer to exploit a recent geopolitical moment—the reality of Trump as president was fantasy up until it happened last November—is fanciful because of the process. You don’t snap your fingers and launch a cool and timely investment security like that. Ask the Winklevoss Twins, who have been waiting on the SEC for years. (Decision On Bitcoin ETF Coming March 11)



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