Japanese equities and country-specific exchange traded funds have pulled ahead of U.S. markets and may continue to hold on to their lead.
The non-hedged iShares MSCI Japan ETF (NYSEArca: EWJ) rose 16.4% year-to-date.
The CurrencyShares Japanese Yen Trust (NYSEArca: FXY), which tracks yen movements against the dollar, declined 3.6% year-to-date.
Meanwhile, the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ), which hedges against a depreciating yen currency, gained 21.3% so far this year. Additionally, the yen-hedged iShares Currency Hedged MSCI Japan ETF (NYSEArca: HEWJ) increased 20.0% and Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEArca: DBJP) advanced 19.9%. [ETFs to Capture a Stronger Japanese Economy]
The Japanese Nikkei Index has been outperforming U.S. markets this year, and Oppenheimer technical analyst Ari Wald argued that Japan’s markets could continue outpacing U.S. equities for the rest of the year, reports Alex Rosenberg for CNBC.
“We are bullish on the U.S., but one of the markets we’re even more bullish on than the U.S. is the Japanese Nikkei,” Wald said on CNBC.
Wald pointed out that Japanese stocks have underperformed U.S. equities by 90% for the past 25 years. Consequently, Wald said that the Nikkei “has plenty of long-term catch-up potential.”
Many investors are already riding the wave of optimism in international equities after the multi-year bull run in the U.S. markets. Stacey Gilbert of Susquehanna said that U.S. investors have funneled $72 billion into international ETFs while U.S. stock ETFs have experienced $25 billion in outflows.
“Investors have positioned, and are continuing to position, everywhere but the U.S.,” Gilbert said on CNBC. “I would say the majority of the focus right now tends to be on Europe and Japan.”
Year-to-date, EWJ has attracted $2.5 billion in net inflows, DXJ saw $3.9 billion in inflows, HEWJ brought in $423.2 million and DBJP added $465.3 million, according to ETF.com. [Investors Still Like the Japan ETF Trade]
iShares MSCI Japan ETF
For more information on Japan, visit our Japan category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.