Foreign small cap exchange traded funds (ETFs) and stocks are offering investors an option to try and avoid the U.S. mortgage meltdown. Financials represent the largest sector in most small-cap value indexes. The average domestic small-cap value stock mutual fund is losing 5% or more this year. Compare that to its foreign counterpart, foreign small-cap value stock funds which on average has gained 7%-plus this year, reports Murray Coleman for MarketWatch.com.
Foreign banks and financial-service markets are holding up better, however, illiquidity in credit markets and subprime loans are still showing up overseas. WisdomTree International Financial Fund (DRF) is a good example, it is up 2.7% this year and domestic financial specialty funds are down more than 9% on average.
In the U.S. financials are dragging small-caps down, but the performance lag in foreign funds isn’t present. WisdomTree International Small-Cap Dividend Fund (DLS) is up 10.1% year-to-date and SPDR S&P International Small-Cap Fund (GWX) is up 1.4% since its April launch. Vanguard Small-Cap Value ETF (VBR) is down 3.2% year-to-date.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.