Nottingham Advisors’ President and Chief Investment Officer, Larry Whistler, was quoted in this weekend’s edition of Barron’s in Chris Dieterich’s article, “International-Focus ETFs Beat U.S. Counterparts.” In the article, Dieterich highlights the recent trend of investors pulling assets out of U.S. stock ETFs and putting assets into international stock ETFs. Nottingham’s own Larry Whistler summed up the shift with, “investors are starting to get reallocated.”
Not only does Dieterich highlight this shift, he also contends that it is actually warranted based on fundamentals. According to the author, while the S&P 500’s CAPE (cyclically adjusted price/earnings) ratio of 27 is well above its median of 16, the same metric for the rest of the developed world averages just 17, below its median of almost 23. In fact, we made a similar call back in February, urging investors to maintain a more global mandate amidst attractive international valuations and shifting economic dynamics.
Thus far, investors have not been disappointed as Dieterich highlights the performance of international equities through the first part of 2015. Investors with direct exposure to both Japan and Europe have been well rewarded as ETFs tracking the two regions have handily outperformed the +3.46% gained by SPDR’s S&P 500 ETF.
In the article, Larry also provides an option for those investors looking for a more diversified approach. He mentions one of Nottingham’s current holdings, the Powershares FTSE RAFI Developed Markets ex-US ETF (PXF), a fund that owns stocks from both Japan and Europe and weights them on the basis of certain fundamentals.
Only time will tell if 2015 serves as the year that international developed equities returned to favor, but Dieterich’s article has some compelling points. For those of you that are interested, the entire article can be found here. For those of you that still prefer the time-honored delivery method of paper print, the article is located on page 34 of the April 27th, 2015 edition.