For example, Australia is known as a commodity country, but its stock market is heavy on financials. In the iShares MSCI Australia ETF (NSYEArca: EWA), the financial sector makes up 51.3% of the portfolio.
Looking overseas, Gibley pointed out opportunities in the Eurozone and Japan, suggesting investors should shift from emerging market stocks to developed market stocks.
In the Eurozone, she points to a type of duel dose of relief in the form of loosening monetary policies and lower fiscal drag. [A Europe ETF to Play the ECB’s Loose Monetary Policies]
Meanwhile, Japanese equities are skyrocket on the new policies in what Gibley dubbed “Don’t fight the Bank of Japan.”
“Sixty percent of Japan’s economic growth is through consumption,” Gibley said. “The Bank of Japan made safer assets less desirable and pushed investors to riskier assets. This creates a wealth effect that promotes spending.”
While yen-hedged Japan ETFs have been outperforming as the currency depreciates, Gibley also argues that the hedge will become less important once the yen stabilizes. [Japan ETFs Pause After GDP Data]
For more information on international exposure, visit our global ETFs category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own SPY and EEM.