With geo-political tension abating for the time being, U.S. markets are again trading close to their all-time highs. An improving labor market, housing data and rising consumer confidence are some of the factors leading the market higher.
While this positive sentiment is definitely leading to inflows in stocks within the home country, other developed and emerging market countries are also picking up.
The worst of the Euro crises is now behind us with the Euro zone gradually getting back on track. The Euro region grew at a modest pace of 0.3% in the final quarter of 2013 as compared to 0.1% growth in the preceding quarter.
Among other factors, rising exports are contributing to the gradually strengthening recovery. Euro zone’s trade surplus during 2013 almost doubled to 153.8 billion euros from 79.7 billion euros in 2012.
The U.K. is also doing quite well in terms of recovery. The economy grew by 0.7% in the final quarter of 2013 on the back of improved business sentiment.
Business sentiment during the fourth quarter in the U.K. rose 2.4% from the previous three-month period. Moreover, business sentiment in 2013 improved 8.5% year over year. Other sectors and regions are also showing positive growth trends, which can boost the country’s output and employment in the longer run.
Moreover, Canada’s GDP grew at a better-than-expected rate of 2% during 2013. Also, Abenomics has put Japan’s economy back on track (read: Japan ETFs in Focus as BOJ Boosts Loan Programs).
As the global scenario, both in the developed as well as emerging markets, strengthen with time, investors can benefit from investing in an ETF focused on foreign markets.
Moreover, small cap stocks are expected to perform better than the larger ones during a recovering scenario. Small cap companies usually focus more on the domestic segment and as such are expected to reap more of the benefits.
Hence a focus on a top ranked foreign ETF that has broad exposure across developed and emerging markets with a focus on small caps would be the best option to capture the uptrend. Foreign small caps also appear to be quite attractive in terms of valuation as compared to U.S. small caps (read: 3 Foreign Small Cap ETFs Likely to Outperform).
About the Zacks ETF Rank
A look at top ranked World ETFs can be done by using the Zacks ETF Rank. This technique provides a recommendation for the ETF in the context of our outlook of the underlying industry, sector, style box, or asset class. Our proprietary methodology also takes into account the risk preferences of investors as well.