Advisors don’t have to look far for encouraging news regarding ex-US developed markets stocks heading into 2021. Positioning for that phenomenon is another matter.
The WisdomTree Developed International Model Portfolio is an ideal foundation for advisors looking to refresh client portfolios with developed markets exposure.
“This model portfolio is designed for investors with a long-term horizon looking for exposure to a broad universe of Developed International 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.”
International ETFs are one way to diversify a portfolio of U.S. stocks. Most investors gravitate to cap-weighted funds, but the WisdomTree model portfolio leans toward multi-factor funds.
Model Portfolio ETFs Provide International Exposure
Entering 2021, international developed markets stocks have several tailwinds, including their positioning as value plays overdue to outperform U.S. rivals.
“Some have questioned whether equity markets have become overly optimistic and too quick to shrug off the black swan event of the pandemic,” said John Leonard, global head of equities for Macquarie Investment Management. “We think a clear view of the pandemic’s effects is essential, including understanding the seemingly elevated valuations in some US stocks. If conditions begin to normalize in 2021, we think lagging segments will begin to outperform, such as value stocks, cyclicals, industrials, financials, small-cap versus large-cap, and non-US stocks outperforming US equities.”
The WisdomTree model portfolio provides exposure to quality stocks, dividend payers, and currency hedging, among other unique traits.
“US equities may look disproportionately expensive because of a handful of large stocks – mainly technology such as the so-called FAANG stocks – driving the market. By accounting for these, we found that US equities tend to fall along the historical line of relative US valuations versus those of other developed markets, and as such, non-US stocks may be positioned to outperform US equities,” according to Macquarie.
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.