Investors have understood by now that U.S. equities are overvalued right now and that’s driving fund flows to foreign equities. China has spearheaded the rebound in emerging markets that kicked off 2023 and while it is certainly a key market to watch, it’s not the only country that’s worth looking at. Despite a land war in mainland Europe for the first time in decades, Germany may be one country to consider investing in with a low-fee foreign equities ETF like the Franklin FTSE Germany ETF (FLGR).
The most recent news on Germany comes from the Munich-based Ifo Institute, which showed that German businesses felt much less “pessimistic expectations” this month. Adding to that, the president of the institute said that while the economy may slow, it was unlikely to hit a recession. Those factors are compounded by a key Eurozone purchasing managers’ index leaving the contraction zone and reaching an expansionary point instead.
Indeed, rather than a contraction, the economy is now projected to expand for 2023, though not very far at just 0.2%. Part of that switch has been due to a significantly warmer winter than anticipated which mitigated the impact of strained natural gas supplies for the country, strained due to Russia’s invasion of Ukraine.
FLGR is one option for investors looking to invest in the developed nation, the key economy in Europe. The low-fee foreign equities ETF tracks the FTSE Germany RIC Capped Index and charges just nine basis points, a fraction of the fee charged by some of its rivals. The index includes large and mid-sized firms in Germany.
FLGR outperformed its ETF Database and Factset Segment Average over the last month and three months, returning 13% and 32.5% respectively. The strategy has also added $1 million in net inflows over the last five days, a notable upwards spike compared to its outflows over the last month.
Foreign equities have picked up steam to start the year, and it makes sense given the challenges facing the U.S. economy this year. Given that China is facing difficulties in a struggling real estate sector and a tough reopening following its “zero-COVID” regime, it may be worth it for investors to track FLGR in the weeks and months to come.
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