• From 2014 Euro Peak: We believe that this has been one of the most critical tests of the methodology of euro-area exporters since its July 2, 2012, inception6. The euro depreciated more than 18% from May 6, 2014, to February 17, 2015. Euro-area exporters were up 14.72%—with a 2.77% cumulative outperformance of euro-area stocks. It’s worth noting that owning euro-area stocks (and owning the euro) would have seen the positive returns of the equities wiped out, stressing the difference between layering and not layering on the euro currency risk7.
Companies Begin to Report Their 2014 Full-Year Results
During the first few weeks of February 2015, we saw the first companies within the top 20 holdings of the WisdomTree Europe Hedged Equity Index report their results.
• Daimler8 : Announced record levels of unit sales, revenue and earnings on February 5. The company’s highest-ever dividend was also proposed.
• Sanofi9 : Announced currency impact turning positive with respect to net sales and business earnings per share during fourth quarter 2014. Proposed 21st consecutive annual dividend increase.
• LVMH10 : Announced currency impact turning positive with respect to evolution of revenues during fourth quarter 2014.
We plan to detail some of these results further in future blogs, but it’s worth emphasizing that even with the euro area’s lackluster economic growth, signs are pointing to the potential for global multinationals to deliver strong results.
1Refers to the MSCI EMU Local Currency Index universe.
2Source: Bloomberg, with performance measured from 12/31/14 to 2/17/15.
3Refers to the MSCI EMU Index with returns measured in U.S. dollars, from 12/31/14 to 2/17/15.
4Euro-area equities or euro-area stocks refers to the performance of the MSCI EMU Local Currency Index.
5Sources: WisdomTree, Bloomberg, with period measured from 12/31/14 to 2/13/15.
6Refers to the WisdomTree Europe Hedged Equity Index.
7Layering refers to the additional risk currency can add to a portfolio
8As of 2/6/15, Daimler represented a 4.78% weight within HEDJ.
9As of 2/6/15, Sanofi represented a 4.53% weight within HEDJ.
10As of 2/6/15, LVMH represented a 2.93% weight within HEDJ.
Important Risks Related to this Article
There are risks associated with investing, including possible loss of principal. Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. Investments in currency involve additional special risks, such as credit risk and interest rate fluctuations. Derivative investments can be volatile, and these investments may be less liquid than other securities, and more sensitive to the effects of varied economic conditions. As this Fund can have a high concentration in some issuers, the Fund can be adversely impacted by changes affecting those issuers. Due to the investment strategy of this Fund, it may make higher capital gain distributions than other ETFs. Please read the Fund’s prospectus for specific details regarding the Fund’s risk profile. Dividends are not guaranteed, and a company’s future ability to pay dividends may be limited. A company currently paying dividends may cease paying dividends at any time.