U.S. investors are often biased toward domestic equities. With scores of developed and emerging markets sporting attractive valuations, investors are embracing ex-US stocks and exchange traded funds this year, but some still have a hard time shedding the domestic bias.
The European economy is steadily improving, supported by a wide range of indicators, which may lead to above average growth for the remainder of the year and into the next. Eurozone growth has accelerated, with growth and business indicators showing positive results.
ETF investors who are still interested in the Europe story have a number of options available, such as the iShares Core MSCI Europe ETF (NYSEArca: IEUR), which is seen as a cheaper “core” alternative to older iShares Europe ETF (NYSEArca: IEV), along with the iShares MSCI EMU ETF (NYSEArca: EZU), which is comprised of of euro member states.
“The fact that international equity markets have underperformed for so long is all the more reason to not give up on them now,” reports CNBC. “There’s no schedule for when reversion to the mean kicks in, but you’d have to be a card-carrying member of the “this time is different” investing club to think that large-cap U.S. stocks, currently trading at nearly 30 times long-term earnings, are capable of strong returns, let along global leadership over the next 10 years.”
This year, international stocks are beating their U.S. counterparts as both the widely followed MSCI EAFE Index and the MSCI Emerging Markets Index are topping the S&P 500. Several of this year’s top asset-gathering ETFs are ex-US developed and emerging markets funds.
Related: It’s Not Too Late to Embrace Emerging Market ETFs
Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) and the iShares MSCI Emerging Markets ETF (NYSEArca: EEM), two of the largest emerging markets ETFs, are surging and gathering assets at a rapid rate.
Moreover, the iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG), the low cost alternative to EEM, is one of this year’s top asset-gathering ETFs as investors have continually looked for low-fee options when embracing ex-US equities.
“Research Affiliates estimates that the annualized real return for U.S. stocks over the next 10 years will be less than 1 percent, compared with 4.8 percent for the EAFE index. More volatile emerging markets are estimated to pack even more opportunity, with an annualized inflation-adjusted return of 6.8 percent,” according to CNBC.
For more information on the ETF market, visit our ETF performance reports category.
Tom Lydon’s clients own shares of VWO.