U.S. markets have been outperforming, but with a rising interest rate outlook and the previously leading technology stocks taking a step back, international markets and related exchange traded funds could begin to shine.

For instance, BNP Paribas Asset Management is repositioning to benefit from a shift in stocks outside the U.S. tech sector, allocating more money to shares in Europe and Japan, the Wall Street Journal reports.

“If we’re expecting U.S. rates to go up, in particular that should, on a relative basis, hinder tech,” Daniel Morris, BNP Paribas Asset Management’s, chief market strategist, told the WSJ.

The Federal Reserve has already indicated its intentions to hike interest rates sooner than expected this year and taper its early pandemic bond-purchasing program in light of elevated inflationary pressures.

Consequently, market observers are already adjusting their outlook to adapt to this new environment. Andrew Sheets, chief cross-asset strategist at Morgan Stanley, also argued that Europe and Japan could be outperforming this year.

“When investors look at those markets they don’t see them as markets that should be punished if interest rates were higher,” Sheets told the WSJ.

Investors who are interested in gaining broad exposure to international markets have a number of options to choose from. For instance, the FlexShares Morningstar Developed Markets ex-US Factor Tilt Index Fund (TLTD) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Morningstar® Developed Markets ex-US Factor Tilt Index. The index reflects the performance of a selection of companies that, in aggregate, possess greater exposure to size and value factors relative to the Morningstar Developed Markets ex-US Index. The index is a float-adjusted market capitalization-weighted index of companies incorporated in developed market countries, excluding the U.S.

Additionally, the FlexShares International Quality Dividend Index Fund (IQDF) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Northern Trust International Quality Dividend Index. The index reflects the performance of a selection of companies that, in aggregate, possess greater financial strength and stability characteristics relative to the Northern Trust International Large Cap Index, a float-adjusted market capitalization-weighted index of non U.S.-domiciled large- and mid-capitalization companies.

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