Director of Research
12/04/2013How to Participate in Japan’s Economic Growth Plan
Since prime minister Shinzo Abe’s election on December 16, 2012, investors have embraced the economic resurrection plan being referred to as “Abenomics,” sending Japanese stocks higher and the yen lower. A critical aspect of Abe’s plan is to extinguish the deflationary forces that have gripped Japan’s economy for the last 15 years. In light of the committed pursuit of Abenomics, we believe there are three important trends investors should be positioning for.
European Economy Begins Recovery: Three Possible Outtakes for Investors
Europe’s economy experienced six straight quarters of negative economic growth—or contraction—before returning to a positive growth rate—or expansion—in the second quarter of 2013. The recovery in Europe has been supported by accommodative monetary policy, low inflation and a moderation in fiscal austerity. Consumer spending has improved, and manufacturing surveys are pointing toward expansion. This stabilization of the European economy is encouraging, and many have begun to look for investment opportunities arising from this nascent recovery.
Global Small Caps Leading the Way: Comparing Regional Opportunities
In this market insight, we highlight the recent performance of the small-capitalization market around the globe and discuss important considerations for further allocations from today’s levels. Adding exposure to small caps can offer increased diversification and return potential, but there are critical differences in investment strategies.
Going Back to the Fundamentals: The 2013 India Rebalance
Amid the noise of recent central bank activity, WisdomTree rebalanced its India Earnings Index on September 20—the same day the new governor of the Reserve Bank of India (RBI) held his first policy meeting and two days after the U.S. Federal Reserve (Fed) announced its monetary policy decision. The timing of this Index rebalance and the RBI meeting was a coincidence—the Index rebalance occurs the same time every September.
Introducing a New Index to Reflect the Rise of the Emerging Market Consumer
One of the major themes that we believe will drive much of the global economy over the coming years is the rise in potential growth from emerging market (EM) consumers. In this Market Insight, we will discuss the key trends in the growth of the emerging market consumer and discuss the new Index we have created and how it is positioned in comparison to traditional emerging market equity indexes.
Rising Rates Causing Shift from Yield to Growth Focus
Lately all eyes have been focused on the Federal Reserve (Fed) and its accommodative monetary policies. Since the 2008–09 global financial crisis, the Fed and central banks around the world have embraced policies to provide ample liquidity to the markets with the goal of keeping interest rates low and credit flowing. However, as the U.S. economy improves, one must consider the possibility of the Fed ending the extraordinary measures it has been taking. Starting in May this year, on just a hint of the Fed possibly dialing back its bond purchases, longer-term interest rates in the U.S. rose considerably.
Assessing the Valuations in Various Emerging Market Strategies
When looking at some of the broad emerging market indexes or even indexes that focus on valuation criteria for the emerging markets, you’ll find them to be among the least expensive parts of the global equity markets today. But not all indexes, sectors or countries share those same low valuations, so we will explore the areas where the valuation opportunity may receive the highest emphasis.
The Search for High Quality and Dividend Growth in the Emerging Markets
In this Market Insight, we discuss WisdomTree’s unique stock selection approach employed in the new WisdomTree Emerging Markets Dividend Growth Index, which are actually the same selection factors and weighting process as used for our U.S. and global ex-U.S. dividend growth Indexes. We’ll also have a general discussion on the recent environment for dividends and equity prices in the emerging markets to provide some present-day context on the investment opportunity set represented by this region and asset class.
Why Consider the WisdomTree United Kingdom Hedged Equity Index
With the introduction of “Abenomics” to Japan—and its impact on yen weakness and equity market strength—the benefits to currency hedging were on prime display. A side effect of this Japan story has been greater interest in applying the same type of currency hedged strategy to Europe. However, we do not believe investor interest in currency hedging stops there.
WisdomTree 2013 Annual Rebalance: Focus on Emerging Markets
Over the past decade, the emerging markets have been one of the lone bright spots of economic growth. Each year, one of the most interesting aspects of the WisdomTree Indexes is the point in time when the global Dividend Stream® is monitored for growth in order to refresh the weights of the underlying constituent companies. This year, we present some of those results, with a special emphasis on the dividend trends exhibited in emerging markets.
WisdomTree’s Dividend Growth Goes International
WisdomTree has just introduced a strategy in the U.S. focused on dividend growth that goes beyond screens that look only at historical dividend increases. In order to unify this concept across different equity market regions, the same methodology is now being applied to the WisdomTree Global ex-U.S. Growth Index. Essentially, in the world outside of the U.S., we compare this new approach to strategies that incorporate backward looking dividend growth screens in various ways.
Introducing Dividend Growth Indexes Not Reliant on Historical Dividend Trends
There is no question that investors are drawn to the idea of dividend growth—potentially more so today than in the past due to the ongoing stimulative monetary policies of the Federal Reserve (and other central banks around the globe). While there is no way to know with certainty what will happen in the future, we believe that our dividend growth methodology applies a logical framework of analysis to essentially increase the probability of placing greater weight in companies that have the best chance of raising their future dividends.
U.S. Dividend Growth Hits Record High – Will You Capitalize?
While dividend growth of firms in the U.S. has accelerated strongly in recent years, the types of companies driving that growth have changed. We believe that index methodologies focused on dividend growth that has occurred in the past through backward-looking dividend growth screens may not be flexible enough to respond to these changing trends, ultimately having the potential to capture the dividend growers of tomorrow.
Are Investors Under-Allocated to India?
When people think of emerging markets from a single country perspective, it’s quite clear that they think of China first, but beyond that the picture gets much murkier. In our analysis, we examine other emerging markets through the levels of assets tracking the performance of country-specific equity market indexes. Our conclusion is that we believe investors may be under-allocating to India.
The Potential Benefits of International Diversification with Mid- and Small-Cap Dividends
In our last market insight, we discussed one segment of the market that often gets overlooked in the hunt for income-producing asset classes—mid- and small-cap dividend payers in the United States. In this piece, we extend the analysis of dividend-paying stocks by market capitalization segment beyond the United States to developed international markets. We believe the benefits of looking beyond large caps and into mid and small caps are, in many ways, even stronger in the international markets.
The Forgotten Dividend Payers: Mid- & Small-Cap Equities
Income is the story of the day—notably the lack of any reasonable levels of income from such traditional sources as bonds and money market investments. Many investors are looking beyond traditional asset classes for income generation but have forgotten mid- and small-cap dividend paying equities. At WisdomTree, we believe mid- and small-cap dividend payers deserve a larger allocation in most investors’ long-term portfolios—particularly portfolios targeting income strategies.
Asian Equities Valued at a Historically Sweet Spot
There are many reasons to be positive on Asia’s economic growth potential within the coming years. Even after some positive performance, we believe that these stocks are in a “valuation sweet spot” relative to the dividends that they have paid. Additionally, for those looking for potential risk mitigation, we introduce the idea of exposure to Asian debt.
Why We Are Still Bullish on Emerging Market Equities For 2013
Our research shows that the prices of emerging market equities are relatively low, which makes us bullish about the prospects for emerging market equities in 2013. Drilling down further, Morgan Stanley research has showed that emerging market defensive stocks could be relatively expensive compared to their cyclical counterparts. We believe that the current positioning of WTEMHY takes advantage of both of these circumstances.
Are Earnings Peaking? A Study of the November 30, 2012, WisdomTree Earnings Index Rebalance
Every year, WisdomTree screens and rebalances its domestic earnings family of Indexes. This year, we recognize the need to issue our take on a crucial question: Are earnings peaking? While there is no way to truly know the future, within this piece we offer our analysis of the U.S. Earnings Stream and what we believe that data indicates with respect to a potential peak.
Are Dividend-Paying Stocks Expensive?
A popular refrain amongst investors has been: “Are dividend-paying stocks becoming expensive?” We have addressed this question in numerous prior commentaries, but we now employ a fresh approach comparing dividend growth to price appreciation. Ultimately, we believe that an environment supportive of strong dividend growth can also have the potential to be supportive of strong equity performance for dividend-payers.
WisdomTree Caps Sectors Domestically: Mid- and SmallCap Dividend Indexes Become More Diversified
At WisdomTree, our Index construction process depends on continually analyzing such risks as individual security influences, country biases or significant sector concentration. As of the November 30, 2012, Index rebalance, WisdomTree implemented a 25% sector cap on domestic equity Indexes to help mitigate sector concentration risk. We think these caps should enhance Index diversification and make the Indexes more attractive benchmarks for their representative segments of the dividend-paying stock universe.
WisdomTree Dividend Index: Dividends Set New Record on Nearly 16% Growth
WisdomTree’s annual rebalance based on the November 30, 2012 Index screening saw a new, record-high dividend stream, finally surpassing the prior high set on November 30, 2007. A major component of this year’s nearly 16% growth in the dividend stream related to companies—like Apple—initiating payments of regular dividends. Within this piece, we analyze the landscape of dividend growth within U.S. equity markets and how this contributed to sectors increasing or decreasing their weights within certain WisdomTree Dividend Indexes.