Investors with foreign equity exposure are also exposed to currency risks. Since the equity exposure is denominated in local currency, any depreciation would translate to a lower U.S.-dollar return. However, the equity-hedged ETFs help diminish any blow back from a weaker foreign currency or stronger U.S. dollar. [A Hedged ETF Provides a Better Way to Access Japan]
In Japan, the cheaper yen, along with low oil prices – the country has increased imports after closing down its nuclear plants, could help bolster per share profits, writes Stephen Harner for Forbes. The government, namely the Government Pension Investment Fund, will also be shifting into exchange traded securities and Japanese equities to help bolster the markets as well.
Despite some risks in the Eurozone, like problems with Greece, European company earnings still have the potential to rebound, writes Virginia Harrison for CNN Money. Darrell Cronk, of Wells Fargo Investment Institute, argues that European companies can generate their strongest earnings growth in over a decade.
Moreover, many are looking overseas at cheaper investment options as U.S. valuations become stretched if not fairly valued. For instance, DBJP shows a price-to-earnings of 15.2 and a price-to-book of 1.2 and DBEF has a 15.6 P/E and a 1.6 P/B. In contrast, the SPDR S&P 500 ETF (NYSEArca: SPY) has a 17.3 P/E and a 2.5 P/B.
Advisors interested in attending the upcoming ETF Virtual Summit on Wednesday, January 21 can register here.