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World Bank Foresees 7-Year High Global Growth: ETFs to Buy

Zacks Equity Research

The World Bank has said that a rebound in trade growth will help the global economy to grow at its fastest pace in seven years. It said that the global economy will grow at 2.9% in 2018, up from 2.7% this year.


The Bank attributes this advancement to signs of improvement in major developed economies and continuing growth in emerging markets. Improving financial conditions globally and commodity price stability are the factors contributing to the optimistic outlook. In the U.S., President Donald Trump’s tax plan, if implemented, is expected to have a positive impact on GDP growth but would most likely widen budget deficit (read: Trump Tax Plan & Muni Bond ETFs: What Investors Need to Know).


The World Bank has also predicted a 2.2% growth for the U.S. in 2018, up from 2.1% this year. Growth for the Euro Area has been predicted to touch 1.7% this year and 1.5% in 2018. Japan is expected to grow at 1.5% this year and 1% in 2018 (read: What Makes These Europe ETFs Still Roaring).


Emerging economies’ growth is expected to drive global growth, as it is expected to grow at 4.1% this year and 4.5% in 2018. Among major emerging economies, China is expected to grow at 6.5% and 6.3% this year and in 2018, respectively. India’s GDP is expected to accelerate 7.2% this year and 7.5% in 2018.


Risks Involved


Despite the positives, the institution has said that there are various risks to the forecast. High uncertainty surrounding Trump’s take on trade restrictions might weigh on several Asian economies. Moreover, renegotiation of NAFTA is also expected to impact Mexico and Canada.


Apart from the rising tide of protectionism, geopolitical risks and a faster monetary policy tightening in the U.S. might also weigh on global markets. Moreover, risks of increased leverage and deficits might negatively impact emerging economies (read: Fed to Tighten Policy: Bet on These ETFs).


Despite risks, global markets have staged a recovery and are making the global economic outlook positive. Let us discuss a few ETFs providing 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 $10.9 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 53.2%, 7.9%, and 6.0% exposure, respectively (as of April 30, 2017). From a sector look, it has significant exposure to Financials, Technology, and Consumer Cyclical, with 18.0%, 16.0%, and 12.0% allocation, respectively (as of April 30, 2017). Apple Inc AAPL, Alphabet Inc GOOGL, and Microsoft Corp MSFT are the top three holdings of this fund, with 1.6%, 1.1%, and 1.1% allocation, respectively (as of April 30, 2017). The fund has returned 12.02% year to date and 14.30% in the last one year (as of June 5, 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 $6.86 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 51.10%, 7.80%, and 5.30% exposure, respectively (as of June 2, 2017). From a sector look, it has significant exposure to Financials, Information Technology, and Consumer Discretionary with 17.55%, 17.20%, and 11.96% allocation, respectively (as of June 2, 2017). Apple Inc, Microsoft Corp, and Amazon.com Inc AMZN are the top three holdings of this fund, with 1.95%, 1.27%, and 0.94% allocation, respectively (as of June 2, 2017). The fund has returned 12.46% year to date and 14.88% in the last one year (as of June 2, 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 $1.62 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 58.94%, 10.53%, and 6.12% exposure, respectively (as of June 2, 2017). From a sector look, it has significant exposure to Information Technology, Financials, and Consumer Staples, with 24.81%, 15.79%, and 14.38% allocation, respectively (as of June 2, 2017). Apple Inc, Microsoft Corp, and Johnson & Johnson JNJ are the top three holdings of this fund, with 7.61%, 5.17%, and 3.29% allocation, respectively (as of June 2, 2017). The fund has returned 12.67% year to date and 16.84% in the last one year (as of June 2, 2017). IOO currently has a Zacks ETF Rank #1 with a Low risk outlook.