Plenty of market participants and pundits have an opinion regarding when the Federal Reserve will raise interest rates. Fortunately, there is some uniformity to those prognostications with “later this year” being the most often bandied about time frame for Fed “lift-off.”
Conventional wisdom dictates that as markets anticipate higher interest rates from the Fed, the U.S. dollar rises. The PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP) has obliged, surging 5.4% year-to-date. Dollar strength combined with the anticipation of divergent monetary policies throughout the developed world has been a boon for currency hedged ETFs, three of which rank among this year’s top 10 asset gathering ETFs.
That trio includes the Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSEArca: DBEF), which has tacked on $11.1 billion this year as investors have sought currency hedged exposure to the traditional EAFE funds.
DBEF, issued by Deutsche Asset & Wealth Management, is not a dedicated Europe ETF, but its exposure to European equities, both Eurozone and ex-Eurozone fare is, significant.
DBEF’s holdings can hail from 21 countries, including the following: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. With combined weight to France and Germany of over 19%, DBEF is a credible hedged euro idea. [Big Growth for This Currency Hedged ETF]
Pinpointing exactly when the Fed will raise rates has become a fool’s errand since 2013, but acquiring some knowledge to that effect is important.