Top 20 Countries YTD

Aug 17, 2017 in Country Funds

Almost two thirds of the way through 2017 and Russia is the only index of the top 20 country funds that is down for the year (-5.2%, -8.2% CAGR)

Performance table of top ETF country funds
Click image for larger version

 

The U.S. (VTI) has the lowest volatility of all, but return wise it's being outpaced.   This isn't surprising as Emerging Market and International country funds have been consistently well represented in the New Highs list since the end of Q1.

The current New Highs / Lows list:

ETF New Highs / Lows list
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Country Funds vs Their Moving Averages

Jun 21, 2014 in Country Funds | moving average

It was interesting to read bearish stories in March and April given that the Global Market was at that very moment IMPROVING.    While U.S. has been in an unbroken bull market,  you can see how there may be better opportunities for new leadership elsewhere....

 

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Top 20 Countries In Q4

Dec 28, 2012 in Country Funds

Final 2 days of the year and S&P 500 is the only index of the top 20 countries that is down in Q4.  Taken as a portfolio since end of September (equal-weight) --- the return is +6.8%.

 

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Global Investing and Home Country Bias

Nov 01, 2012 in Country Funds

If you follow the daily news cycle at all, you are probably getting a lot of news exposure to things that are pretty meaningless in the context of a global asset allocation.    Think about it for a minute -- a typical 'growth' allocation portfolio might be 75% risk assets and 25% income-oriented ('spread product' or gov't bonds).   Of that 75% risky, some percentage is U.S. equities -- and some percentage of that might be risk assets OTHER than US-based common stocks.  Already, we are taking a percentage of a percentage.

Then you think about how much coverage CNBC and other media outlets give to domestic company earnings reports -- and then compare that to something like the coverage of the entire "Asia-Pac" regional ETF investment opportunity.  Do you really need any coverage at all on Zynga and GroupOn? 

Let's put it another way -- how much have you heard about the Pacific Ex-Japan segment (Australia, Hong Kong & Singapore all combined) returning +20% this year?  Just the Hong Kong market alone has a weight in the Global index well above that of Apple or any other single stock.    Apple is of course a very important company and you should certainly pay attention to it -- but then you should also think about global investing opportunities at least as much (more) than you think about any specific individual U.S. company.  If you don't, you will be missing a lot of opportunities that may provide leadership for extended periods of time.

Let's look at the last ten years as an example.   While the U.S. market was leading the worlds equity markets for much of 2011-2012, keep it in context of what happened prior to that:

Home country bias is to be expected to a degree -- people invest in what they know.  Moreover,  prior to the ETF movement it was somewhat difficult to find low-fee vehicles that access international markets.   But that has all changed.   It's now ultra low-cost (no purchase fees, low expense ratios and in some cases zero commission).

The rankings chart below demonstrates a shift in relative strength that have been picked up and reflected in our Allocations Board portfolios back when it was occurring -- in August.   If you were just following news on a set of specific U.S. companies, you probably weren't paying attention to things like this.

 

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ETF Country Funds

Sep 28, 2012 in Country Funds
 
Good analysis is the synthesis of a lot of different research you do.   Below is one way to look at the global market in terms of its trend.   By this account, the trend remains up and the fact that the world markets had problems in the middle part of the year (significant drawdowns) is entirely consistent with many other bullish years.   September proved rewarding for the bullish camp.  On to October.   #RiskReward #Sharperatio
 
 
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Moving Averages Have Confirmed Trends

Aug 17, 2011 in Country Funds | moving average

Equity Indices have confirmed the loss in relative strength made a few months ago -- snapshots below:

Country Funds (note the different types of countries that were already in downtrends at or before last month-end:   Canada, Australia, China etc...)

 

 

Here are 25 Very Common Indices (of course, bonds and gold have been in bull markets):

 

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Vanguard Europe ETF Country Weights

Jul 11, 2011 in Country Funds

 

Just information to note.   Greece is very small weight in even the regional Europe ETF.  However, Spain (EWP) and Italy (EWI) are 5th and 7th in the index:

 

 

According to PIMCO, "Italy has the 3rd largest amt of debt outstanding behind US & Japan. A bailout would require much more funding than PIGS combined."

 

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Country Fund ETF Total Returns YTD

Nov 08, 2010 in Country Funds

We showed where the S&P 500 ranked relative to an adjusted Ameritrade 100 ETF list recently.   This shows the S&P 500 vs the primary country funds as defined by weightings within the world index.  Note that other than Brazil, the smaller countries have done generally better.    And developed Europe has obviously been an area of weakness -- though Sweden is the exception, up +30% on the year.    Greetings to all our users in Stockholm.

 


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MSCI Index ETF : World Focus (ACWI)

May 05, 2010 in Country Funds | Strategy

The MSCI Index ETF list is quite useful as a starting point for ways to think about the global investment landscape.  Moving from a domestic to a world focus expands the individual equity universe to well north of 8,000 securities (vs the typical Russell 1000 focus of domestic managers). Global exports are increasing on a secular basis as the world increasingly trades goods and services with each other ---- globalization is unstoppable.

Ironically, I say all of this as our models have been favoring domestic over international ETFs for months now and being short (or avoiding) Europe in particular seems like more than just a short-term trade.

Nevertheless, over the long-run it makes sense that more choices will offer diversification benefits in terms of enhancing return (long and short) and likely reducing risk (though this benefit becomes less as globalization increases).  Without going into a long dissertation on this topic, I will just instead show the current relative valuations of the MSCI World Index ETF (ACWI).   

MSCI Index ETF ACWI Weightings

 

Note that approximately 2/3 of this index is in the United States and Europe.   It is not AS out of balance as it may at first seem as companies like those in China have very low profit margins. In the U.S., a company like Google might not contribute a lot to GDP – but it does have very high overall profits.   Conversely, Wal-Mart contributes a lot to U.S. GDP but has very low margins – and China supplies Wal-Mart so you can imagine how their profit margins look.    So each country will have GDP changes and profit margin cycles to think about --- its not JUST about GDP growth and population trends.   

Over the very long-run though, these world weightings will likely change in favor of countries with stronger demographics --- (the above chart should only be viewed as a snapshot in time).  Importantly, it is not going to be a smooth ride -- even as it seems obvious that countries like China and India grow to be much higher percentages of the total.  

The next chart from the ETF Portfolios page re-creates the MSCI World Index ETF as a sanity check.  We can do this with regional and country funds.   It won’t be perfect because there are some anomalies with indexes regarding 'sampling' and starting vs ending weights etc.…

 

 

So within the context of a dynamic and volatile global marketplace, ETFreplay.com is based upon – finding quantifiable, back-testable methods to help the investor think about balancing reward and risk.  In other words,  to participate in global strength and to avoid/underweight/short regions of the world showing global weakness.  There will be many large corrections within secular themes.  You need to protect yourself by balancing the longer-term demographic trends with the realities of extremely volatile markets.  This is doable -- so long as you show proper respect for the markets inherent volatility.  

Finally, here is a look at our ETF Screener.    The ‘ETFreplay.com Selected Betas’ grouping has most of these indexes scattered within it.  We don’t think its complete to just look at regions of the world --- we like to view Relative Strength across asset-classes as well, not just equities.   Note here that this is not properly done unless you are tracking total return  --- dividends and distributions can make a significant difference in your screens and models.  You need clean data to properly calculate relative strength -- especially across asset classes. As experienced professionals, we want to stress the relative benefit of a well-maintained total return database of 400 ETF's --- vs a 15,000 security database that simply reports trading numbers and ignores total return.  We have intentionally created a focused environment (based on ETFs) to minimize the data integrity issues that can greatly affect financial models.    

Details are important.   We cannot be perfect -- but we know that simply ignoring the issue (as others do) is particularly disingenuous.  ETFs are based on indexes.  Index returns are ALWAYS based on total return.  Price alone does not reflect total return, adjustments are needed.  We make these adjustments so you don't have to... 

 

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