Is now the time to invest abroad? Yes, a big 50 basis point rate cut has brightened the economic picture in the U.S. That doesn’t guarantee a soft landing from inflation, however.
Jobs data has lost some of its luster in recent months, with hiring slowing and unemployment rising. The U.S. economy, while durable, may not be out of the woods yet. That, and ongoing concentration risk, may be pointing some investors toward foreign equities.
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Why foreign equities? Many U.S. investors are likely looking for some amount of diversification in their portfolios. Foreign markets offer some serious opportunities therein. Whether that’s Europe’s big developed names or Japan’s reforming corporate names, foreign firms offer some notable appeal. With concentration risk in the U.S. stock market looming as just a handful of firms have driven much of the market’s growth this year, spreading out allocations could really intrigue.
Of course, not all routes into foreign firms are the same. Some strategies can really outdo others. Active ETFs, in particular, could offer some potent tools abroad. Active managers often lean on fundamental research, which can especially help in foreign markets where specific knowledge can be a key differentiator.
What’s more, the adaptability active investing offers can be a boost. Investing abroad means facing a variety of markets with their own domestic, economic challenges. A fund being able to actively respond to events can set it apart from committee-managed passive funds.
The T. Rowe Price International Equity ETF (TOUS ) actively invests in international equities for a 50 basis point fee. The strategy, which launched last summer, holds around 150 names. It seeks firms with quality business models and high earnings potential, considering both macroeconomic data and local market inputs. With a fundamental, bottom-up approach, it presents one option for those looking at active ETFs investing abroad.
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