Most equities investors have picked out their favorite U.S. companies and sectors, but this U.S.-centric theme leaves out a large portion of the world economy. Alternatively, investors can utilize exchange traded funds that provide regional and country-specific exposure to gain exposure to global growth.
“The global expansion is seen ramping up as 2014 progresses, with growth forecast to reach 3 percent by the fourth quarter, up from 2.6 percent in the first quarter,” according to to S&P Capital IQ.
Investors can take a look at broad stock ETFs that cover global growth, such as the Vanguard Total World Stock ETF (VT) , which tracks 5178 companies from around the world. VT is up 19.5% year-to-date.
In Europe, the European Central Bank has enacted a more aggressive monetary policy to help support the Eurozone after the the financial debt crsis, lowering benchmark rates to 0.25%, reports John Wasik for Reuters.
Some have also argued that European stocks are undervalued compared to the U.S. since the Eurozone is just exiting a recession, whereas the U.S. has been on the path to recovery for a while.
For broad Europe exposure, investors can look at something like the Vanguard FTSE Europe ETF (VGK) , which tracks stocks from Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. [Europe ETFs Look to Keep Rolling]
In the emerging markets, China is still leading the charge, with an economic expansion of 7.8% in the third quarter. The Chinese economy is expected to expand 7.4% in 2014, leading world economies.
Nevertheless, potential investors should be aware of the possible currency risk ahead. Once the fed eventually eases back on its accommodative measures, the U.S. dollar will strengthen, which could hurt non-U.S. dollar-denominated foreign investments – foreign investments in a weaker currency will be worth less U.S. dollars once converted over.
For more information on global exposure, visit our global ETFs category.