As the Global Economy Recovers, Snag International ETF Exposure

ETF investors who were hesitant to look overseas during the height of the pandemic can now do so with the iShares Core MSCI EAFE ETF (IEFA).

“The global economy will recover this year from its coronavirus slump at a pace not seen since the 1970s as strong momentum builds in most major economies, according to Reuters polls of over 500 economists,” a Reuters report said.

IEFA seeks to track the investment results of the MSCI EAFE IMI Index composed of large-, mid- and small-capitalization developed market equities, excluding the U.S. and Canada. The fund generally will invest at least 90% of its assets in the component securities of the underlying index and in investments that have economic characteristics that are substantially identical to the component securities of the underlying index.

The index is designed to measure large-, mid-, and small-capitalization equity market performance and includes stocks from Europe, Australasia, and the Far East. IEFA’s expense ratio comes in at a low 0.07%.

“IEFA delivers broad exposure to developed markets equities outside of the U.S., and does it for a fraction of the price charged by the legacy iShares fund,” an ETF Database analysis said. “IEFA also includes smaller-cap names ignored by its older sibling, making it a staple holding of long-term investors who want exposure to developed markets outside North America.”

IEFA gives investors:

  1. Low cost, comprehensive access to stocks in developed international countries
  2. Use at the core of a portfolio to diversify internationally and seek long-term growth
  3. Strong performance, with a gain of close to 50% the past 12 months

IEFA Chart

A Synchronized Recovery

While countries are in various stages of their respective vaccine rollouts, many are still anticipating a generalized economic recovery. As mentioned, investors who were once wary of investing outside the United States can do so with more confidence.

“A synchronised global economic recovery is underway, notwithstanding the continuing battle against COVID-19. Every economy we cover is projected to register a meaningful rebound in annual average GDP growth this year,” noted Janet Henry, global chief economist at HSBC in the Reuters report.

“Much will depend on whether governments prefer a strategy of eliminating or suppressing the pandemic; access to effective vaccines; the structure of the economy; the willingness of households to spend their accumulated savings; and the scale and mix of policy stimulus.”

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