Rising LEIs and foreign central bank stimulus can create catalysts that unlock appreciation potential in foreign developed markets, which continue to trade at discounts to their own history as well as compared to U.S. valuations.
As a result, we are finding attractive investment opportunities in developed markets like Europe and Japan.
Meanwhile, the U.S. Federal Reserve may believe that fiscal stimulus will increase inflationary pressures as the new presidential administration’s well-publicized fiscal stimulus plans come at a time when the Fed views the economy at near full employment.
As a result of inflationary pressures coming from fiscal stimulus and increased global economic growth, we anticipate the Fed will raise interest rates more quickly and more persistently than the market expects over the next 12-18 months.
These rising short-term interest rates could push the value of the U.S. dollar higher to levels not seen since the early 2000s.
Therefore, investors may wish to hedge the foreign currency risk in developed economies through options such as the WisdomTree Europe Hedged Equity Fund (HEDJ), the iShares Currency Hedged MSCI Eurozone (HEZU), the WisdomTree Japan Hedged Equity (DXJ) or the iShares Currency Hedged MSCI Japan ETF (HEWJ).
At the time of writing, Stringer Asset Management (SAM) held HEDJ and DXJ 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.