Annual Inflation Rate: A Good Predictor of Single-Country ETF Returns?

by on September 16, 2014

The growth of the ETF universe has spawned dozens of products that have helped to open up the doors to previously hard-to-reach asset classes for the average, self-directed investor. Through the use of a single ticker, anyone with an online brokerage account can now access virtually any asset class from around the world, whether it’s frontier markets, rare earth metals, or foreign bonds. 

businessman hand touch virtual graph,chart, diagramWhen it comes to foreign equity markets especially, the growing roster of single-country ETFs continues to open up the doors to markets that were previously too difficult, or too costly, to access for retail investors. Many investors who dabble in overseas markets know the importance of staying on top of economic data releases, as they can offer valuable insights and sometimes inspire massive price swings [see Is Annual GDP Growth a Good Predictor of Single-Country ETF Returns?]. 

More specifically, when it comes to inflation indicators, there has been a great deal of discussion over the years on how rising prices impact stock market returns. In some instances, and in some nations, double-digit inflation has coincided with stellar equity market returns; however, in other cases, equity markets have suffered steep losses whenever the annual inflation rate has exceeded the 3% mark. In other words, no two economic environments and no two nations are alike, which is why we’ll let the data speak for itself when it comes to investigating the effects of inflation on stock market returns [see Single Country ETFs: How They've Performed Since Inception]. 

Click on any of the buttons below and you’ll see a table of countries along with a single ETF representative of each nation; also listed are the annual inflation rates for each nation along with the ETF’s performance for that particular year. Lastly, click on any of the column headings to re-sort the data whichever way you like. 

For more ETF insights and analysis, sign up for the free ETFdb newsletter:

Country Ticker Annual Inflation Rate Annual Return
United Kingdom EWU 3.61% -47.68%
Germany EWG 2.63% -45.55%
France EWQ 2.81% -43.75%
Sweden EWD 3.44% -46.91%
Austria EWO 3.22% -63.49%
Netherlands EWN 2.49% -49.00%
Belgium EWK 4.49% -63.57%
Spain EWP 4.08% -38.05%
Italy EWI 3.38% -48.88%
Switzerland EWL 2.43% -28.38%
Russia RSX 14.11% -73.67%
South Africa EZA 11.54% -37.62%
China FXI 5.86% -47.78%
Malaysia EWM 5.44% -41.30%
Singapore EWS 6.52% -46.70%
South Korea EWY 4.67% -56.49%
Japan EWJ 1.37% -26.98%
Australia EWA 4.35% -48.02%
United States SPY 3.84% -36.80%
Canada EWC 2.37% -44.62%
Mexico EWW 5.13% -41.63%
Brazil EWZ 5.66% -54.36%
Country Ticker Annual Inflation Rate Annual Return
United Kingdom EWU 2.17% 36.23%
Germany EWG 0.31% 20.54%
France EWQ 0.09% 27.28%
Sweden EWD -0.49% 55.46%
Austria EWO 0.51% 57.84%
Netherlands EWN 1.19% 40.84%
Belgium EWK -0.05% 49.47%
Spain EWP -0.29% 33.09%
Italy EWI 0.75% 22.05%
Switzerland EWL -0.48% 22.10%
Russia RSX 11.65% 139.34%
Turkey TUR 6.25% 103.10%
South Africa EZA 7.13% 51.65%
China FXI -0.70% 47.34%
India EPI 10.88% 95.10%
Malaysia EWM 0.58% 49.54%
Singapore EWS 0.60% 67.93%
Thailand THD -0.85% 81.47%
South Korea EWY 2.76% 71.81%
Japan EWJ -1.35% 3.24%
Australia EWA 1.82% 68.20%
United States SPY -0.36% 26.35%
Canada EWC 0.30% 53.16%
Mexico EWW 5.30% 53.88%
Brazil EWZ 4.89% 122.00%
Country Ticker Annual Inflation Rate Annual Return
United Kingdom EWU 3.29% 8.34%
Germany EWG 1.10% 6.65%
France EWQ 1.53% -4.70%
Sweden EWD 1.16% 32.89%
Austria EWO 1.81% 14.62%
Netherlands EWN 1.28% 3.36%
Belgium EWK 2.19% 3.70%
Spain EWP 1.80% -21.18%
Italy EWI 1.54% -15.54%
Switzerland EWL 0.70% 12.66%
Russia RSX 6.86% 22.14%
Turkey TUR 8.57% 23.46%
South Africa EZA 4.26% 36.98%
China FXI 3.31% 3.54%
India EPI 11.99% 20.25%
Malaysia EWM 1.71% 37.67%
Singapore EWS 2.80% 23.33%
Indonesia IDX 5.13% 41.76%
Thailand THD 3.27% 56.74%
Vietnam VNM 8.86% 4.02%
South Korea EWY 2.96% 28.80%
Japan EWJ -0.72% 12.76%
Australia EWA 2.85% 15.35%
United States SPY 1.64% 15.06%
Canada EWC 1.78% 19.00%
Mexico EWW 4.16% 27.27%
Brazil EWZ 5.04% 7.07%
Chile ECH 1.41% 45.27%
Colombia GXG 2.28% 51.73%
Peru EPU 1.53% 57.22%
Country Ticker Annual Inflation Rate Annual Return
United Kingdom EWU 4.48% -3.94%
Germany EWG 2.08% -17.64%
France EWQ 2.12% -17.69%
Sweden EWD 2.96% -16.81%
Norway NORW 1.30% -18.46%
Austria EWO 3.27% -34.23%
Netherlands EWN 2.34% -15.98%
Belgium EWK 3.53% -15.37%
Spain EWP 3.20% -9.82%
Italy EWI 2.74% -24.12%
Poland EPOL 4.22% -32.02%
Ireland EIRL 2.58% -4.83%
Switzerland EWL 0.23% -7.91%
Russia RSX 8.44% -28.18%
Turkey TUR 6.47% -36.56%
Egypt EGPT 10.05% -51.71%
South Africa EZA 5.28% -15.68%
China FXI 5.41% -17.56%
India EPI 8.86% -40.42%
Malaysia EWM 3.20% -2.62%
Singapore EWS 5.25% -18.60%
Indonesia IDX 5.36% -0.60%
Thailand THD 3.81% -4.23%
Vietnam VNM 18.68% -43.83%
South Korea EWY 4.00% -13.50%
Japan EWJ -0.28% -14.77%
Australia EWA 3.39% -11.57%
New Zealand ENZL 4.43% 0.12%
United States SPY 3.16% 1.89%
Canada EWC 2.91% -12.42%
Mexico EWW 3.41% -11.96%
Brazil EWZ 6.64% -24.14%
Chile ECH 3.34% -26.51%
Colombia GXG 3.41% -15.20%
Peru EPU 3.37% -21.78%
Country Ticker Annual Inflation Rate Annual Return
United Kingdom EWU 2.82% 15.25%
Germany EWG 2.01% 32.26%
France EWQ 1.96% 24.35%
Sweden EWD 0.89% 24.47%
Norway NORW 0.71% 25.10%
Austria EWO 2.49% 30.97%
Netherlands EWN 2.45% 22.04%
Belgium EWK 2.84% 35.21%
Spain EWP 2.45% 5.39%
Italy EWI 3.04% 15.41%
Greece GREK 1.50% 29.09%
Poland EPOL 3.75% 41.60%
Ireland EIRL 1.69% 34.23%
Switzerland EWL -0.67% 21.76%
Russia RSX 5.07% 15.04%
Turkey TUR 8.89% 65.60%
Egypt EGPT 7.12% 44.56%
South Africa EZA 5.41% 21.00%
China FXI 2.65% 19.18%
India EPI 9.31% 25.34%
Malaysia EWM 1.66% 14.78%
Singapore EWS 4.53% 31.76%
Indonesia IDX 4.28% 2.40%
Thailand THD 3.01% 40.13%
Vietnam VNM 9.09% 26.40%
South Korea EWY 2.19% 21.94%
Japan EWJ -0.03% 9.22%
Australia EWA 1.76% 23.99%
New Zealand ENZL 0.88% 31.70%
United States SPY 2.07% 15.99%
Canada EWC 1.52% 9.09%
Mexico EWW 4.11% 32.82%
Brazil EWZ 5.40% 0.37%
Chile ECH 3.01% 11.31%
Colombia GXG 3.18% 27.38%
Peru EPU 3.65% 23.51%
Country Ticker Annual Inflation Rate Annual Return
United Kingdom EWU 2.55% 20%
Germany EWG 1.50% 31%
France EWQ 0.86% 24%
Sweden EWD -0.04% 24%
Denmark EDEN 0.78% 41%
Norway NORW 2.13% 12%
Austria EWO 2.00% 11%
Netherlands EWN 2.51% 29%
Belgium EWK 1.11% 25%
Spain EWP 1.41% 32%
Italy EWI 1.22% 19%
Greece GREK -0.92% 25%
Poland EPOL 1.17% 4%
Ireland EIRL 0.50% 46%
Switzerland EWL -0.24% 26%
Russia RSX 6.76% -1%
Turkey TUR 7.49% -27%
Egypt EGPT 9.48% 7%
South Africa EZA 5.71% -7%
China FXI 2.63% -2%
India EPI 10.91% -9%
Malaysia EWM 2.11% 8%
Singapore EWS 2.39% 0%
Indonesia IDX 6.41% -23%
Thailand THD 2.18% -15%
Vietnam VNM 6.59% 8%
South Korea EWY 1.31% 4%
Japan EWJ 0.36% 26%
Australia EWA 2.45% 2%
New Zealand ENZL 0.92% 13%
United States SPY 1.46% 32%
Canada EWC 0.94% 5%
Mexico EWW 3.81% -2%
Brazil EWZ 6.20% -17%
Chile ECH 1.79% -24%
Colombia GXG 2.02% -15%
Peru EPU 2.82% -25%

The Bottom Line

The inflation and returns data is all over the place from year to year. That is to say, there is no clear-cut relationship between a nation’s inflation rate and its equity market performance in a given year. In some cases, there is a positive correlation, meaning that healthy inflation in the range of 2%-3% has led to strong gains; however, there are other instances in which this relationship does not hold true, and in fact, double-digit inflation has led to both stellar and dismal returns. The takeaway here is that investors should not rely on a single economic indicator when it comes to formulating an investing thesis and making an allocation to any one nation in particular. 

Follow me on Twitter @SBojinov

[For more ETF analysis, make sure to sign up for our free ETF newsletter]

Disclosure: No positions at time of writing.