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Fitch Sees Fastest Global Growth in 10 Years: ETFs To Buy

Zacks Equity Research

Global Credit rating agency Fitch said in its most recent Global Economic Outlook (GEO) that it expects the global growth to reach 2.9% in 2017 and 3.1% in 2018.


Fitch attributes this improvement to continuous development in advanced as well as emerging economies. The biggest improvement contribution has been attributed to the Euro zone, owing to stronger economic data and better confidence in the region. Fitch expects the region to grow at 2% this year (read: Currency Hedged Europe ETFs to Buy on ECB Meet).


Among the emerging markets, Fitch expects India’s growth in the range of 7.4-7.6% in the next two fiscal years as Goods and Service Tax (GST) implementation helps the country further its growth goals. It stated that the most recent quarter GDP slowdown was affected by demonetization and is expected to stabilize in the coming quarters. The rating agency also stated that Brazil and Russia have been emerging from periods of negative growth and moving to positive real GDP growth. Moreover, Fitch forecasts 5.9% GDP growth for China in 2018 and 5.8% in 2019 (read: India Inflation at Record Low: ETFs in Focus).


Euro zone’s political risks seem to have abated, following Emmanuel Macron’s victory in the Presidential elections as well as the legislative elections. However, Fitch noted that the U.S. President’s protectionist stance might hurt the global economy’s performance, specially emerging markets that are hugely dependent on trade with the world’s biggest economy. Moreover, the Federal Reserve is expected to start curtailing its $4.5 trillion balance sheet this year, which is expected to introduce volatility in the markets. Adding to the agony, China’s debt burden is an added risk the global economy faces (read: Will EM ETF Rally Hit the Brake to Start Q3?).


Despite these headwinds, the overall picture for the global economy looks promising. Let us now discuss a few ETFs focused on providing a global exposure.


Vanguard Total World Stock ETF VT


This fund is one of the broadest options available in the equity market, offering a diversified global exposure to investors at a relatively cheaper expense ratio.


It has AUM of $11.9 billion and charges a paltry 11 basis points in fees per year. From a geographical perspective, its top three allocations are the U.S., Japan, and UK, with 52.7%, 8.1%, and 6.1% exposure, respectively (as of May 31, 2017). From a sector look, it has significant exposure to Financials, Technology, and Consumer Cyclical, with 19%, 16%, and 12.0% allocation, respectively. Apple Inc AAPL, Alphabet Inc GOOGL, and Microsoft Corp MSFT are the top three holdings of this fund, with 1.7%, 1.2%, and 1.1% allocation, respectively (as of May 31, 2017). The fund has returned 11.78% year to date and 18.39% in the last one year (as of June 20, 2017). VT currently carries a Zacks ETF Rank #2 (Buy) with a Low risk outlook.


iShares MSCI ACWI ETF ACWI


This fund is one of the popular options available in the equity market, offering a balanced diversified exposure to global large-cap blend equities.


It has AUM of $6.82 billion and charges 33 basis points in fees per year. From a geographical perspective, its top three allocations are to the U.S., Japan, and UK with 51.94%, 7.82%, and 5.25% exposure, respectively (as of June 20, 2017). From a sector look, it has significant exposure to Financials, Information Technology, and Consumer Discretionary with 18.12%, 17.13%, and 11.87% allocation, respectively (as of June 20, 2017). Apple Inc, Microsoft Corp, and Amazon.com Inc AMZN are the top three holdings of this fund, with 1.85%, 1.26%, and 0.94% allocation, respectively (as of June 20, 2017). The fund has returned 10.55% year to date and 16.08% in the last one year (as of June 20, 2017). ACWI currently sports a Zacks ETF Rank #1 (Strong Buy) with a Low risk outlook (read: 4 Foreign ETFs That Gained Double-Digits in May).


iShares Global 100 ETF IOO


This fund is one of the most popular options available in the equity market, offering a diversified exposure to global mega-cap equities.


It has AUM of $1.59 billion and charges 40 basis points in fees per year. From a geographical perspective, its top three allocations are to the U.S., UK, and Switzerland with 59.38%, 10.54%, and 6.16% exposure, respectively (as of June 19, 2017). From a sector look, it has significant exposure to Information Technology, Financials, and Consumer Staples, with 24.12%, 16.32%, and 14.34% allocation, respectively (as of June 19, 2017). Apple Inc, Microsoft Corp, and Johnson & Johnson JNJ are the top three holdings of this fund, with 7.17%, 5.13%, and 3.39% allocation, respectively (as of June 19, 2017). The fund has returned 10.23% year to date and 17.31% in the last one year (as of June 20, 2017). IOO currently has a Zacks ETF Rank #1 with a Low risk outlook.