Exchange-traded fund (ETF) investors who were hesitant to get international exposure during the height of the pandemic may be slowly coming around. Market experts think now’s the right time, and investors who also want a dividend tilt around this low-yield environment can look to international exposure.
“A number of factors, both fundamental and technical, have contributed to strong relative returns for US investors in international developed and emerging equity markets in recent months,” said Christopher Vass – senior product manager, FTSE Russell, in an email. “In developed markets, Korea has benefited from a large overweight in technology stocks and a low impact from COVID-19 relative to other markets, and Germany has a large exposure to China via exports in the industrials and basic materials sector, making it an indirect play on the China economic recovery. And, in July, US investors in emerging markets have benefitted quite a bit from the sharp fall in the US dollar, with the DXY Dollar Index down 4.2% for the month. A weaker US dollar translates into higher returns in dollar-denominated terms for foreign equities.”
Furthermore, countries have been quick to inject stimulus measures into their respective economies to give them a swift kick in the pants.
“The pandemic-induced market disruptions have caused both short-term and longer lasting changes to countries,” said Dina Ting, head of global index portfolio management, Franklin Templeton. “These changes affect countries differently based on a number of factors, including the handling of the pandemic itself, stimulus and trade policy, and the sector make-up of each country. The COVID crisis continues to drive rethinking of supply chains – with greater focus on shorter chains and less globalization, which will likely result in continued wide-dispersion of single country returns. All of these changes have created new opportunities for investors to disaggregate exposure to developed and emerging markets by expressing views in specific countries they feel may be better positioned for the future.”
For ETF investors looking for international exposure as well as dividends, they can look at a pair of funds like the:
- FlexShares International Quality Dividend Dynamic Index Fund (IQDY): seeks investment results that correspond generally to the price and yield performance of the Northern Trust International Quality Dividend Dynamic IndexSM. The index is designed to reflect 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.
- 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 IndexSM. 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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