Following a solid 1.62% gain last week, the MSCI Emerging Markets Index is higher by 13.33% year-to-date, confirming that stocks in developing economies are taking a turn for the better.
Advisors can position client portfolios to capitalize on the emerging markets resurgence with WisdomTree’s Emerging Markets Multi-Factor Model Portfolio.
“This model portfolio is designed for investors with a long-term horizon looking for exposure to a broad universe of Emerging Market equities primarily using factor focused ETFs,” according to WisdomTree. “The selected ETFs provide certain factor tilts that have the potential to generate excess return relative to comparable cap-weighted benchmarks over longer-term holding periods. The strategies may use both WisdomTree and non-WisdomTree ETFs.”
Some Optimism Abroad
A variety of factors, including value stocks rebounding and positive developments for coronavirus vaccines, are boosting the case for emerging markets equities.
“Positive developments for vaccines offer hope for the ultimate reopening of the global economy in 2021 and are causing many to look for the much-awaited “rotation” into value strategies. In one example of this value rotation, emerging market equities have outperformed the U.S. by more than 600 basis points (bps) since early September,” notes WisdomTree analyst Matt Wagner. “By a number of measures, WisdomTree’s lowest-valuation and most value-leaning Indexes can be found in emerging markets.”
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.
“We understand many investors may have significant ‘home country bias’ reflected in their portfolios as a byproduct of years of U.S. outperformance,” notes WisdomTree. “While it’s impossible to time turning points for when international equities may outperform, perhaps a more trade-friendly White House and a global economic recovery in the years to come may make that turning point arrive sooner rather than later.”
For more on how to implement model portfolios, visit our Model Portfolio 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.
