Many have enjoyed a bull run in the markets, focusing largely on U.S. domestic equities. However, if overseas stocks begin to pick up speed, exchange traded fund investors may be missing out on a growing opportunity.
ETF Trends publisher Tom Lydon spoke with Steve Deroian, Head of ETF Strategy at John Hancock, at the Inside ETFs conference that ran Jan. 22-25, 2017 to talk about opportunities around the globe, despite the current environment that has drawn investors’ attention to U.S. markets.
“I think it’s fear,” Deroian said. “When you look at the U.S. markets, you’ve been able to really participate in that and see great growth. So anytime there’s an opportunity that doesn’t seem as truthful today, I think individual investors and advisors tend to shy away.”
Consequently, investors remain under allocated to overseas markets after years of underperformance, which may leave many missing out on a potential opportunity ahead.
“What we see, though, is when we look at portfolios of advisors that we deal with is under allocated international,” Deroian said.
John Hancock, though, expects the tides to change soon.
“What we’ve found is that international markets may be poised to make a move,” Deroian said. “It’s been a long, long time of over performance by the U.S. market versus the international market – A, and B, some of the of the policies that are in place could really help keep that, prop up the international space, especially in Europe.”
Consequently, investors can look to international ETF plays to gain exposure to a potential run in global equities ahead, especially after a prolonged bull rally in U.S. equities.
“We think there’s an opportunity for international play well over the next several years, and again, if you’re not there early, you’re going to miss the trade,” Deroian said.
For example, the John Hancock Multifactor Developed International ETF (NYSEArca: JHMD), tries to reflect the performance of the John Hancock Dimensional Developed International Index. The underlying index is comprised of developed market companies outside the U.S. and Canada, and it also implements a rules-based screening or multifactor screening process that singles out small-caps, lower relative price and higher profitability, which academic research has linked to higher expected returns.
John Hancock is known as a manager of managers to build best portfolio for investors. JHMD is no different as the ETF leverages research from Dimensional Fund Advisors to provide a rules-based, smart beta strategy.
“What’s great about their process is it doesn’t just work in the U.S. It works in international markets as well, and recently in December, we launched a new ETF on the developed market side, and we really think that’s going to allow for a structured, a responsible way to approach the international market, especially in times like this when you may be a little fearful,” Deroian said.
Click here to read John Hancock’s 2017 Outlook on ETF Trends and NYSE’s exclusive 2017 Market Outlook Channel.