“We retain our overweight on EM, particularly Asia ex. Japan, as the economic landscape stays supportive and valuation are reasonable,” he added.
However, investors seeking international market exposure should consider potential currency risks as Deutsche projects a stronger dollar or weaker foreign currencies ahead.
“We believe that the forces which have strengthened the dollar are waning,” Bush said.
Investors can turn to currency-hedged ETFs to limit foreign exchange currency risks. For example, the Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSEArca: DBEF) tracks developed Europe, Australasia and Far East countries and hedges against depreciation in related currencies. The Deutsche X-trackers MSCI All World ex US Hedged Equity ETF (NYSEArca: DBAW) provides broad market exposure by following a market cap-weighted index of international stocks, excluding U.S. exposure and hedging against depreciation in the underlying currencies against the U.S. dollar. Additionally, the Deutsche X-trackers MSCI Emerging Markets Hedged Equity Fund (NYSEArca: DBEM) targets the emerging markets.
In the fixed-income space, Thomas Bouchard, Director and Portfolio Manager for High Yield Strategies at Deutsche Asset Management, pointed to the strong performance of the high-yield segment, especially in a more risk-on environment. Trading volume for speculative-grade debt space remains strong. While default rates have modestly increased, high-yield issuer balance sheets remain healthy, dampening risk exposure.
Investors interested in gaining exposure to high-yield debt may consider a bond ETF option like the Deutsche X-trackers USD High Yield Corporate Bond ETF (NYSEArca: HYLB).
Sean Edkins, Director, ETF RVP at Deutsche Asset Management, also pointed to multi-factor ETF strategies as a way for investors to potentially enhance equity exposure through a transparent and rules-based process to focus on the best companies in the market.
For instance, investors may consider the Deutsche X-trackers Russell 1000 Comprehensive Factor ETF (NYSEArca: DEUS), Deutsche X-trackers Russell 2000 Comprehensive Factor ETF (NYSEArca: DESC), Deutsche X-trackers FTSE Developed ex US Comprehensive Factor ETF (NYSEArca: DEEF) and Deutsche X-trackers FTSE Emerging Comprehensive Factor ETF (NYSEArca: DEMG), which combine five single factors into a multi-factor strategy, including value, size, momentum, low volatility and quality.
Financial advisors who are interested in learning more about Deutsche Asset Management’s outlook can watch the webcast here on demand.