Seemingly getting lost in the post-Brexit environment and concerns about the impact of multiple national elections throughout the Eurozone this year are Swiss equities and the related exchange traded funds.
For example, the iShares MSCI Switzerland Capped ETF (NYSEArca: EWL) is up more than 6% year-to-date.
Switzerland is desperate to see the Fed normalize its interest rate policy. Swiss stocks and EWL would be prime beneficiaries of franc weakness against as many developed currencies as possible. Nearly all of EWL’s largest holdings generate the bulk of their revenue in markets outside of Switzerland. EWL is the largest Switzerland ETF trading in the U.S.
“Switzerland is a buy. Our assessment criteria are met in that overall there is a net add to the private sector allowing it to grow. The trend is however slowing with the capital account trend. The parsimonious government cannot be relied upon to take up the slack to counter this trend,” according to a Seeking Alpha analysis of Switzerland’s economy.
The $1 billion EWL holds 38 stocks and tracks the MSCI Switzerland 25/50 Index. EWL allocates almost 52% of its combined weight to healthcare and consumer staples stocks. Three stocks – Nestle, Roche and Novartis – combine for 44.5% of EWL’s roster.
The First Trust Switzerland AlphaDEX Fund (NYSEArca: FSZ) is a smart beta alternative to the cap-weighted EWL. Like the other AlphaDEX ETFs from First Trust, FSZ is comprised of stocks that are ranked by a variety of growth and value factors including price appreciation value to price, cash flow to price and return on assets. FSZ is up 6.5% this year.
“The government has a debt control obsession coming from a now obsolete gold standard economic management belief system and is more likely to make the situation worse than better. The folly of the pursuit of the golden surplus common to most western governments,” notes Seeking Alpha. “The government sector is a negative influence in the economy, and this appears culturally based and not likely to change despite a high level of financial intelligence, or paradoxically because of it, there is a free lunch for private banks being enjoyed here.”
EWL has a currency hedged equivalent, the iShares Currency Hedged MSCI Switzerland ETF (NYSEArca: HEWL), which debuted in mid-2015.
For more news and strategy on Switzerland ETF market, visit our Switzerland category.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. 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.