International equities and the related exchange traded funds have not been immune to the tariff-induced tumble currently affecting global markets. However, some market observers believe fundamental factors at play could bolster the international equity complex later this year.
Investors may have to wait out more near-term downside, but for those wanting to keep an eye on ex-U.S. equity ideas, the WisdomTree International Quality Dividend Growth Fund (IQDG ) could be a solid starting point. Though skeptics may be apt to say it’s not saying much at this juncture, the WisdomTree ETF is trouncing the S&P 500 on a year-to-date basis.
The $669.5 million IQDG, which turned nine years old earlier this month, is also keeping pace with some international benchmarks. That potentially signals the advantages of a methodology rooted in quality factors and an emphasis on reliable dividend growth. Those attributes could be attractive to investors looking to remain engaged with equities as the market attempts to move past U.S. tariff initiatives.
IQDG Could Have Tailwinds
It’s not just trade spats that international stocks and ETFs like IQDG must confront. The asset class’s reputation for lagging domestic stocks for an extended timeframe could keep some investors at bay. However, it could imply that the early 2025 leadership exhibited by these stocks, could resume later this year. Notably, those stocks include IQDG components.
“After an 18-year period of mostly lagging international performance versus the U.S. — the longest such drought going back to 1978 — it may be too early to call for a regional leadership rotation,” noted ClearBridge. “But against the backdrop of rising U.S. tariffs, a potential global trade war and the seismic policy shifts they have sparked in Europe, the early results are encouraging.”
A European Rebound
Europe could catalyze an IQDG rebound later this year. The region accounts for a significant portion of the ETF’s geographic exposure. That could be a positive at a time when stocks there remain attractively valued. That’s particularly true when measured against an increasingly compelling fundamental backdrop.
“Massive fiscal reforms in Europe led by Germany, with an emphasis on increased defense and infrastructure spending, as well as the potential for lighter regulation could jumpstart earnings growth and equity valuations in the region,” added ClearBridge.
ClearBridge also noted that European equities could reward investors with long-term time horizons — three to five years or beyond. Indeed, the European Central Bank (ECB) currently mulls one of the continent’s largest stimulus efforts in recent memory.
“Europe is preparing to stimulate its economy in a way it hasn’t done in a very long time. Having seen the benefits of stimulus acts in the U.S. (CHIPS, IRA etc.) and the job creation and growth they created, Europe will likely embark on something similar. The U.S., however, remains in fiscal contraction mode, something that will feed through into slowing GDP and, we believe, earnings and multiples as well,” concluded ClearBridge.
For more news, information, and analysis, visit the Modern Alpha Channel.
This article was prepared as part of WisdomTree’s general paid sponsorship of VettaFi | ETF Trends. This specific content within and any opinions expressed therein belong solely to VettaFi and do not reflect the opinion or analysis of WisdomTree, its employees, or its affiliates. Content published on VettaFi | ETF Trends is provided for educational purposes only and should not be considered investment or tax advice. For investment or tax advice, please consult a financial professional.
WisdomTree is an independent company, unaffiliated with VettaFi | ETF Trends. WisdomTree has not been involved with the preparation of the content supplied by VettaFi | ETF Trends. It does not guarantee, or assume any responsibility for its content.
