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Friday, October 07, 2022

US dominance in global markets may be behind us. Here’s why international investing is making a comeback

International investing may no longer be on the back burner.

Nearly half of this year’s $55 billion in exchange-traded fund inflows has gone to funds focused on companies outside the United States, ETF Action’s Mike Akins told CNBC’s “ETF Edge” on Monday.

Out of 47 total-market country ETFs, the US currently ranks 41st — eighth-worst — in terms of year-to-date returns, but there’s still a long way to go until international and US investing come close to even, the firm’s founding partner said.

“From an allocation perspective, there has been a huge migration into US” assets, he said. “Now we’re already seeing early evidence of that trend starting to change.”

The US has dominated developed and emerging international markets for over a decade, but those days may be behind us, Akins said.

“A lot of these international markets are better situated, with higher allocations to cyclicals,” he said. “It’s just a natural fit into the broader story of growth falling out of favor.”

International currency-hedged ETFs such as WisdomTree’s Europe Hedged Equity Fund (HEDJ) are meant to provide exposure to equity securities across the globe. Japan is also seeing a lot of interest in the value rotation, the firm’s global head of research, Jeremy Schwartz, said in the same interview.

“We’re seeing that rotation to international, rotation to value,” he said. “Even some of our international value baskets are outperforming US value now.”

Big-time investors such as Warren Buffett have also been buying international stocks. A few years ago, Buffett bought a number of Japanese trading companies, doing so on a currency-hedged basis, according to Schwartz.

HEDJ is up nearly 65% ​​since its launch, in 2009.

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