This article is part of a regular series of thought leadership pieces from some of the more influential ETF strategists in the money management industry. Today’s article features Gary Stringer, president and chief investment officer of Memphis, Tennessee-based Stringer Asset Management.
We believe the global economy is improving and has sufficient room left to continue growing, especially in developed economies, where broad economic fundamentals are improving over the near term and valuations remain attractive.
For example, eurozone business confidence is rising, but is still below the levels reached prior to the global financial crisis of 2007-2008 and before the European Central Bank mistakenly raised interest rates in 2011 (Exhibit 1).
Also, rising employment and jobs creation in Europe and Japan reflect strong gains (Exhibits 2 and 3). So long as foreign central banks remain accommodative, these economies should continue their upward trend.
We think this global expansion should benefit consumer, health care and industrial companies, especially those located in Europe and Japan.
Additionally, companies in these countries are trading at an attractive discount in aggregate to their historical averages (Exhibit 4).
There are several ETF options available for investors looking to add exposure to international equities that should benefit from global economic expansion.
Some ideas include the WisdomTree International Hedged Quality Dividend Growth Fund (IHDG), the iShares MSCI EAFE Growth (EFG) and the Vanguard International Dividend Appreciation ETF (VIGI).
Here’s how those three have performed this year against U.S. large-caps as represented by the SPDR S&P 500 ETF Trust (SPY):
At the time of writing, Stringer Asset Management held EFG among its universe of ETFs included in its suite of ETF Portfolios. SAM is a Memphis, Tennessee third-party investment manager and ETF strategist. Contact SAM at 901-800-2956 or at [email protected]. For a complete list of relevant disclosures, please click here.
The Bloomberg Barclays High Yield Very Liquid Index is designed to measure the performance of publicly issued U.S.-dollar-denominated high-yield corporate bonds with above-average liquidity. High-yield securities are generally rated below investment grade and are commonly referred to as "junk bonds." The Index includes publicly issued U.S.-dollar-denominated, noninvestment-grade, fixed-rate, taxable corporate bonds that have a remaining maturity of at least one year, regardless of optionality, are rated high yield (Ba1/BB+/BB+ or below) using the middle rating of Moody's Investors Service Inc., Fitch Inc., or Standard & Poor's Inc., respectively, and have $500 million or more of outstanding face value.
The MSCI Europe Index is a free-float-adjusted market-capitalization index designed to measure developed-market equity performance of 16 European countries. The countries with the largest capitalization weightings in the index are the United Kingdom, France, Switzerland and Germany; others represented are Austria, Belgium, Denmark, Finland, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain and Sweden.
The MSCI Japan Index is a free-float-adjusted market-capitalization index designed to measure the performance of the large- and midcap segments of the Japanese market.