Last year could have been brutal for international stocks, but they rallied nicely to finish the year. The outlook for ex-US developed markets is brighter in 2021.
The WisdomTree Developed International Multi-Factor Model Portfolio offers advisors an effective way to position client portfolios for more upside in international developed markets.
“This model portfolio is designed for investors with a long-term horizon looking for exposure to a broad universe of Developed International equities primarily using factor focused ETFs,” according to WisdomTree. “The selected ETFs provide certain factor tilts that have the potential to generate excess return relative to comparable cap-weighted benchmarks over longer-term holding periods. The strategies may use both WisdomTree and non-WisdomTree ETFs.”
Compelling pluses abound for this model portfolio, both in the near-term and for the duration of 2021.
“Central banks around the globe responded with massive liquidity injections, which helped calm fears. The Federal Reserve in the United States slashed interest rates, established lending facilities to assist businesses, and even bought corporate bonds,” writes Morningstar analyst Adam Sabban. “The European Central Bank followed a similar pattern, announcing stimulus measures in March designed to promote bank liquidity and keep borrowing costs in check. Markets rebounded sharply to close out March, followed by gains through the summer months and into the fall. By November, the losses were recouped.”
Going International with Model Portfolios
Getting international exposure is a great way to pull in uncorrelated market movements. But at a time when a pandemic has the whole world in its grasp, it becomes quite the challenge. Fortunately, smart beta multi-factor strategies used in ETFs featured in WisdomTree’s model portfolio can rise to the challenge.
Many ex-US markets are considered value destinations. The WisdomTree portfolio offers quality/value tilts with several of its components holdings.
“The growth-value dynamic reversed some in the fourth quarter,” notes Sabban. “Optimism following promising news on coronavirus vaccines drove the MSCI ACWI ex USA up 17%, but this time value stocks performed best. Companies in industries badly hurt by the pandemic’s effects, such as airlines and credit-sensitive financials, saw the strongest recoveries. The year closed on a positive note as the U.K. and the European Union finally reached a Brexit trade deal, though the news was met with a muted reaction as the markets had largely priced the event in.”
For more on how to implement model portfolios, visit our Model Portfolio Channel.