“We retain our overweight on EM, particularly Asia ex. Japan, as the economic landscape stays supportive and valuation are reasonable,” he added.
Related: 3 Strategic Reasons Advisors Should Adopt Factor-Based ETFs
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.