Knowing some of the weaker-performing WisdomTree ETFs could provide investors with a glimpse of some of the most contrarian stories in global asset classes for those bargain hunters chasing assets that have faced the most pressure recently.
It’s interesting that investors will often slice and dice their U.S. equity exposures in almost endless fashion but focus only on the MSCI EAFE Index when looking abroad. If anything, the factor discussion becomes even more interesting when you look outside the United States, because, in these less-efficient markets, disciplined strategies governed by a systematic focus on factors could have greater potential to outperform over time.
The value style has tended to outperform the growth style. This is something that many just assume to be true, and it fits with the behavioral aspect of finance as well. Growth stocks can be exciting, thereby getting bid up in price and leading many to invest well above an appropriate measure of fair value. The result: future underperformance.
Japanese Prime Minister Shinzo Abe won a decisive victory in Sunday’s Upper House polls. “Abe envy” is now spreading among the global political elite. If Team Abe demonstrates strong economic policy leadership in the coming three to four months, a “Japan premium” should start to develop in Japanese risk asset markets.
This is a very good time to re-engage with Japan, in our view. The Brexit capitulation trade forced TOPIX down to almost 30% below its August 2015 peak, which in turn makes Japanese equities the most attractively valued equity market in the world.