Emerging markets equities and the related ETFs performed admirably in August, but some strategies outdid cap-weighted rivals.
Additionally, some emerging markets ETFs are really topping old guard rivals this year. Don’t be fooled by the MSCI Emerging Markets Index’s tepid year-to-date gain of 1.52%. The Invesco DWA Emerging Markets Momentum ETF (PIE) is beating the developing world benchmark by a 4-to-1 margin this year.
PIE invests in public equity markets of the global emerging region. It invests in stocks of companies operating across diversified sectors. The fund invests in momentum stocks of large-cap companies. It seeks to track the performance of the Dorsey Wright Emerging Markets Technical Leaders Index, by using full replication technique. Invesco Exchange-Traded Fund Trust II – Invesco DWA Emerging Markets Momentum ETF was formed on December 27, 2007, and is domiciled in the United States. The fund will invest at least 90% of its total assets in the securities that comprise the underlying index. The underlying index is comprised of equity securities of large-capitalization companies based in emerging market countries.
Of PIE and Policy
Accommodative monetary policy around the world is bolstering the case for emerging markets assets, including PIE.
“That dynamic was rarely more in evidence than last week when Federal Reserve Chairman Jerome Powell signaled policymakers will remain accommodative for longer through more tolerance of inflation, a stance that drove U.S. stocks to fresh records and the dollar lower as real yields declined. All of which provided renewed support for emerging markets,” reports Bloomberg.
PIE’s momentum-based strategy is serving investors well this year. Momentum has been a popular factor as equities are gaining steam behind a post-pandemic rally. With the help of federal governments and central banks, equities have been riding a nice wave of momentum.
Momentum investing is rooted in the notion that securities that are on torrid paces will continue acting that way over the near-term while laggards will continue slumping. Long-term data for the momentum factor are compelling.
PIE’s purview on momentum boils down a 41% combined weight to technology and consumer discretionary stocks – two sectors that are among the best-performing groups in emerging markets this year. Chinese and Taiwanese stocks combine for nearly 73% of PIE’s geographic exposure.
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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.