Megaphone icon ETF Database is now VettaFi. Read More >
ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Free Cash Flow
    • Future ETFs
    • Gold & Silver Investing
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Modern Alpha
    • Multi-Asset
    • Portfolio Strategies
    • Retirement Income
    • Thematic Investing
    • Volatility Resource
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
    • ETF Data for Journalists
    • ETF Nerds
  • Research
    • First Bitcoin ETF
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Videos & Podcasts
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Modern Alpha Channel – ETF Database
  2. Turn to Dividends & Currency Hedging During Inflation
Modern Alpha Channel - ETF Database
Share

Turn to Dividends & Currency Hedging During Inflation

Karrie GordonAug 05, 2022
2022-08-05

The July jobs report dropped today, revealing that the U.S. has added 528,000 new jobs, officially recovering the 22 million jobs that were lost at the beginning of the pandemic, reported the Wall Street Journal.

Turn to Dividends & Currency Hedging During Inflation
.Image source: Wall Street Journal

Unemployment has also dropped again, to 3.5%, a low last experienced at the very beginning of 2020, pre-pandemic. The participation rate dropped in July from 62.2% in June to 62.1% in July as the labor market continues to feel the losses of 623,000 workers overall, creating sustained wage pressures as demand for workers remains high.

Wage growth is on the rise, coming in higher than analyst expectations at a 0.5% increase from June and up 5.2% over last year.

“From a Fed perspective, this report says, ‘let’s keep pressing on the policy brake’ because inflation is uncomfortably high,” Greg Daco, chief economist at EY-Parthenon, told WSJ.

As inflation persists, there is anticipation by some economists that more workers will be driven back to the workforce by the impact of higher prices on household budgets.

The Federal Reserve isn’t set to meet again until September which leaves room for one more round of monthly reports before having to decide on what kind of interest rate increase is necessary to tame persistent inflation, but for now, anticipation is high for another 75 basis points increase. Fed-funds futures are currently sitting at 67% odds of a 0.75% hike. On Thursday those odds were just 34%.

“The strength of today’s number leaves the base case assumption that the Fed would probably have to do another 75-bps (basis points) rate hike from here unless the CPI report shows some dramatic weakness, which seems highly unlikely at this point,” Rick Rieder, CIO of global fixed income at BlackRock Inc.’s and head of the BlackRock global allocation investment team, told MarketWatch.

Investing in International Quality Dividends With a Hedge

More challenging times look to be ahead for U.S. investors and it could be a good time to look to international investments for diversification opportunities. In a time of a strong U.S. dollar, currency rates can play a big role in reducing return potential but the WisdomTree International Hedged Quality Dividend Growth Fund (IHDG B+) offers exposure to dividend-paying companies in the developed world, excluding the U.S. and Canada, while hedging for currency fluctuations.

IHDG seeks to track the WisdomTree International Hedged Quality Dividend Growth Index which consists of dividend-paying companies that exhibit growth characteristics (ex U.S. and Canada), while simultaneously hedging against a basket of currencies. The index pulls from the top 300 companies (on average) within the WisdomTree International Equity Index that have the highest rank of quality and growth factors. Factors highlighted include long-term earnings growth expectations, return on equity, and return on assets.

The index weights companies by dividends paid over the last annual cycle, with heavier weight going to the companies with greater total dollar dividends, and each security is capped at a 5% weight in the fund while sectors and countries are capped at 20% (real estate is capped at 15%).

The currency hedge of the index means that there should be higher returns when the U.S. dollar is strong, compared to equivalent unhedged investments, and will be lower when the U.S. dollar is weaker. The fund utilizes forward currency contracts or futures contracts to offset the impact of foreign currencies.

The top sectors of the fund include health care at 20.82% allocation, industrials at 19.37%, consumer discretionary at 18.60%, materials at 17.55%, information technology at 11.01%, and many smaller sector allocations.

IHDG has an expense ratio of 0.58%.

For more news, information, and strategy, visit the Modern Alpha Channel.


Content continues below advertisement

Loading Articles...
Help & Info
  • Contact Us
  • Mission Statement
  • Press
Tools
  • ETF Screener
  • ETF Analyzer
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Performance Visualizer
  • ETF Database Model Portfolios
  • ETF Database Realtime Ratings
  • ETF Database Pro
More Tools
  • ETF Launch Center
  • Financial Advisor & RIA Center
  • ETF Database RSS Feed
Explore ETFs
  • ETF News
  • ETF Picks of the Month
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Best ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Legal
  • Terms of Use and Privacy Policy
  • © ETF Flows LLC
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X