Emerging markets equities, small-caps, and growth stocks are poised to rally in 2021. Investors can tap all those themes under a single ETF umbrella with the ERShares International Equity ETF (NYSEARCA: ERSX).
ERSX is benefiting from the rally in domestic small-caps, but investors shouldn’t let home country bias get in the way because there’s a broader universe of ex-US small stocks, many of which are growth names from developing economies. The ERShares ETF provides exposure to those benefits without an all-in commitment in what can be a trick asset class to navigate.
“External stars also appear to be aligning for emerging markets. A vaccine-driven global recovery should spur exports,” reports Craig Mellow for Barron’s. “The Biden administration should make U.S. trade policy more predictable, if not more liberal. An ultradovish Federal Reserve mutes the threat of a bump in U.S. interest rates, which would suck capital back into the dollar.”
Growth stocks are often associated with high-quality, prosperous companies whose earnings are expected to continue increasing at an above-average rate relative to the market. Growth stocks generally have high price-to-earnings (P/E) ratios and high price-to-book ratios. Still, data suggest the growth/value premium isn’t overly elevated relative to historical norms. That’s potentially good news ERSX.
The ERSX ETF Is the Right Model for Emerging Themes
“Emerging markets enter 2021 with a new, and improved, image. China, South Korea, and Taiwan, which account for two-thirds of the global equities index, flipped the script on developing markets in 2020, quelling the Covid-19 pandemic, while the rich West flailed,” according to Barron’s.
ERSX selects the most entrepreneurial, primarily Non-US Small Cap companies, that meet the thresholds embedded in their proprietary Entrepreneur Factor (EF). ERShares’ ETF delivers strong performance across a variety of investment strategies without disrupting investors’ underlying risk profile metrics. Their geographic diversity enables them to harness global advantages through additional returns associated with currency fluctuations, strategic geographic allocations, comparative trade imbalances, and relative supply/demand strengths.
It’s been a tough decade to be an emerging markets investor, as this sector has underperformed the S&P 500 since 2010. But market watchers say after 10 years of lagging behind the United States, emerging markets may finally be ready for the prime time, with higher valuations and a rebounding global economy.
The countries that have rebounded from the coronavirus or managed to keep cases under control are leading the way for emerging markets, among them China and South Korea. And there are hopes U.S.-China relations will normalize under President-elect Joe Biden’s administration.
For more on entrepreneurial strategies, visit our Entrepreneur ETF Channel.
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.