At the 22nd Annual Global Indexing & ETFs conference, hosted by RWM and IMN, at Monarch Beach Resort in Dana Point, California, financial industry leaders and experts touched upon the investment ideas in the extended U.S. bull market environment and the increasing popularity of smart beta strategies.
Keynote speaker Jeffrey Gundlach, Chief Executive Officer and Chief Investment Officer of DoubleLine, warned of increasing short-term risks in a seasonal weak period for U.S. equities in the coming months ahead, especially after the post-election Trump rally.
However, Gundlach maintains a favorable view of overseas assets, notably Eurozone and emerging market stocks that are trading at a much more attractive valuation relative to U.S. markets. Moreover, Gundlach does not expect the U.S. dollar to experience a strong appreciation, even after the Federal Reserve hiked interest rates, which may help limit foreign exchange risks when looking at foreign assets.
Investors interested in gaining exposure to broad Europe markets can take a look at options like the iShares MSCI EMU ETF (NYSEArca: EZU) or SPDR EURO STOXX 50 (NYSEArca: FEZ), which both target European Monetary Union or Eurozone markets. EZU is trading at a 15.5 price-to-earnings and a 1.6 price-to-book and FEZ shows a 15.1 P/E and a 1.6 P/B, whereas the S&P 500 is hovering around a 19.2 P/E and a 2.7 P/B.
For developing market exposure, investors can look to broad options like the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) and the iShares MSCI Emerging Markets ETF (NYSEArca: EEM), the two largest emerging market ETF by assets. VWO has a 13.0 P/E and 1.6 P/B while EEM trades at a 12.1 P/E and a 1.5 P/B.
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Additionally, Gundlach favors India among other emerging countries, citing positive fundamentals like demographics that lean toward a larger young working population and room for further capital market reforms that could open the country up to further growth and investments.
Investors can use country-specific ETFs like the iShares MSCI India ETF (BATS: INDA), PowerShares India Portfolio (NYSEArca: PIN) and the WisdomTree India Earnings ETF (NYSE: EPI) to access India’s markets.
Many at the IMN conference also spoke about the growth in the rules-based factor indexing or smart beta ETF category. As the ETF industry continues to expand and fund issuers try to seek out the next great investment idea, more have rolled out smart beta offerings.
A number of traditional open-end mutual fund shops have started to switch over to the ETF game, with smart beta strategies coming out as some of their first ETF offerings. For instance, the Oppenheimer Large Cap Revenue ETF (NYSEArca: RWL), which weights components based revenue generated, and the JPMorgan Diversified Return International Equity ETF (NYSEArca: JPIN), which diversifies risk through a risk-weighting process that lowers exposure to historically volatile regions and sectors, along with screening stocks based on value, size, momentum and low volatility factors to drive strong performance, are just some of the recent additions to the expanding ETF universe.
For more information on ETF news at conferences, visit our ETF conferences category.