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Why Did International ETFs Outperform in March?

International investing has been extremely upbeat lately on the improving health of several economies. Policy easing has played a major role in driving global economic growth for the last couple of quarters. Be it Euro zone or emerging markets – all these regions grabbed investors’ attention in March. Let’s find out what drove this outperformance?

Inside the Outperformance

First of all, most developed economies – which faced deflationary threats so long – are slowly returning to the inflationary track. Notably, Japan and the Euro zone are still pursuing an ultra-easy monetary policy along with quantitative easing. A wave of cheap money in these international nations have led to stepped-up economic activities, and rising business and consumer confidence (read: Global Economy on the Mend: 4 Small-Cap ETF Plays).

The Euro zone silently surpassed the U.S. economy on the growth front in 2016. Last year, Euro zone’s GDP growth of 1.7% outdid the U.S. growth of 1.6%. The Japanese economy, grew 0.3% sequentially in Q4 of 2016, maintaining the same clip of the prior quarter. Plus, it was the fourth successive quarter of growth.

The Australian economy grew 1.1% in Q4 compared with a 0.5% decline in Q3 and beat markets expectations of 0.7% growth. Emerging markets, as a whole, are also better placed now (read: Why Emerging Market ETFs Are Surging This Year).

With the Fed offering a dovish outlook on the policy tightening front, the yields on U.S. Treasury notes were restricted in March. This spread another round of enthusiasm among investors for foreign investing, who bet on the relatively higher-yielding emerging market bloc. In fact, developing-market equities offered investors about 12.4% return this year, double the developed stocks, to mark their best start to a year in the last five years.

As Trump trade lost some momentum on the failure of health care plans and rising uncertainty on the passage of Trump’s other plans, investors diversified their portfolio globally. They seem to have targeted the faster-growing economies, more stable and compellingly valued stocks and ETFs. Needless to say, after such a stupendous Trump rally in the last few months, U.S. stocks are guilty of overvaluation, which may have made investors jittery.

Best-Performing International ETFs of March

In this light, we highlight the best-performing international ETFs of March. These funds breezed past the S&P 500-based fund SPY in the last one month (as of March 30, 2017) (read: 5 Alternative ETFs to Beat Market Slump).

WisdomTree Dynamic Currency Hedged International Quality Dividend Growth DHDG – Up 7.44%

The fund, very light on AUM,is designed to provide exposure to the developed market companies while at the same time neutralize exposure to fluctuations between the value of foreign currencies and the U.S. dollar with a hedge ratio ranging from 0 to 100% on a monthly basis.

The fund has a double-digit weight in Consumer Discretionary, Industrials, Consumer Staples and Health Care. United Kingdom, the Netherlands, Switzerland and Japan get a double-digit focus each in the fund. It charges 48 bps in fees.

SPDR S&P International Tech Sect ETF IPK – Up 6.69%

The 247-stock fund gives exposure to the S&P Developed Ex-U.S. BMI Information Technology Sector Index. The fund charges 40 bps in fees and is heavy on Japan (30.21%) and South Korea (21.71%).

First Trust International IPO ETF FPXI – Up 4.75%

The fund follows the IPOX International Index which is rules based and market-cap weighted measuring the performance of the 50 largest and typically most-liquid international companies. China and Japan form about half of the fund. Financials is the top sector of the fund followed by Consumer Discretionary and Information Technology (read: How are China ETFs Outperforming the Market in 2017?).

VanEck Vectors Morningstar International Moat ETF MOTI – Up 4.15%

The fund looks to track the overall performance of 50 attractively priced companies outside the U.S. with sustainable competitive advantages. The fund is tilted toward Australia while sector-wise, Financials gets the major focus.

ALPS International Sector Dividend Dogs ETF IDOG – Up 4.26%

The fundis widely spread across its holdings and various sectors. Europe takes about three-fourth of the fund. The product charges 50 bps in fees.

Want to learn more about foreign market investing? Check out our recent podcast for additional information:

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SPDR-SP 500 TR (SPY): ETF Research Reports
SPDR-SP I TECH (IPK): ETF Research Reports
FT-INTL IPO FD (FPXI): ETF Research Reports
VANECK-MS IM (MOTI): ETF Research Reports
WISTR-DC HIQDGF (DHDG): ETF Research Reports
ALPS-IN S DV DG (IDOG): ETF Research Reports
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