Tactical Investment Ideas
Get the where’s, why’s and how’s behind some of today’s most compelling investing options.
Complement your long-term strategic plan with moves designed to target short term opportunities. Strategic patience mixed with timely pivots can be an effective way to enhance your overall returns.
For Near-Future Tactical Investment Opportunities, WisdomTree Believes These Ideas should be Considered by Investors:
Grab the Bull by the Yen
We believe the Japanese stock market is primed for outperformance because relative valuations there remain low, while at the same time the country’s interest rates have remained pinned around zero. Adding fuel to potential outperformance is the decline in the Japanese yen in recent years. The currency is at its weakest since 1998—which is surprising, considering the country’s consumer price inflation was only 2.4% over the last year, a far cry from the nearly double-digit rises we have been seeing in the U.S. The yen has also been weakening versus the Chinese yuan, enabling its exports to be more competitive relative to major rivals.
WisdomTree is bullish on exposure to Japan’s equity markets. To help capitalize on the opportunity in the country’s stocks, we make the case for hedging yen exposure. In globally diversified portfolios, currency-hedged equities can help mitigate risk, as investors look to eliminate their susceptibility to situations that involve stocks declining at the same time that a foreign currency weakens.
Years ago, WisdomTree developed a suite of currency-hedged equity strategies that seek to neutralize the impact that exchange rates can have on international holdings. The WisdomTree Japan Hedged Equity Fund (DXJ) offers broad equity exposure to Japanese dividend paying companies, without the yen.
Last updated: August 2022.
Accessing International with Currency-Hedged ETFs
Jul 25, 2022
Todd Rosenbluth, Head of Research at VettaFi, is joined by Jeremy Schwartz, Global Chief Investment Officer at WisdomTree, to discuss accessing international with currency-hedged ETFs.
Hold the SOE’s. Explore China’s Private Side
China’s stock market is now the second-largest in the world, due to a rapidly expanding middle class of consumers and the rise of globally influential multinationals. We believe the best way to access this growing market is through a strategy that excludes state-owned enterprises. WisdomTree has observed a consistently large performance gap in cumulative returns between indexes that exclude state-owned enterprises (SOEs) and ones that include them. Why? Government-influenced companies are prone to operational inefficiencies and weaker profits because they tend to be driven by political interests more than shareholder value.
Completely eliminating the risk of government influence may be impossible. But funds that eliminate exposure to SOEs—like our WisdomTree China ex-State-Owned Enterprises Fund (CXSE) – significantly mitigate it. As a result of this strategy, CXSE reduces exposure to “old China” sectors like energy, financials and materials, focusing more on “new China” sectors such as tech, communication services and consumer products. As a result, the Fund plugs investors more directly into the middle class that’s fueling China’s consumption growth. An example of a state-owned enterprise that is excluded by CXSE is telecom giant China Mobile. Additionally, many of China’s largest banks are also viewed as instruments of state policy.
China is a massive emerging markets economy with a stock market that investors shouldn’t ignore. For those considering a China allocation, CXSE provides investment opportunities with a low net expense ratio. It is also known for having broad market exposure and access to Chinese A-shares, while neutralizing companies that are influenced by government decisions.
Last updated: August 2022.
Take a Stand on the Dollar
Most major foreign currencies are down versus the U.S. dollar in 2022. For investors who are concerned that continued dollar strength will adversely impact the return on their international investments, hedging forex exposure could make sense. For others, adding foreign currency to their portfolio may offer an opportunity to take the other side.
The WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU) provides broad, dynamic exposure to the U.S. dollar against a basket of foreign currencies. Since it correlates negatively to international equity and bond portfolios, it can be used in an alternative bucket as a broad-based diversifier.
The WisdomTree Emerging Currency Strategy Fund (CEW) offers cost-effective exposure to the currencies and money markets of a broad range of emerging markets countries. The Fund seeks to achieve total returns that reflect money markets in selected emerging markets countries, in addition to participating in the changes in foreign currencies’ value.
Last updated: August 2022.
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