With 2024 drawing to a close, it’s fair to say this has been another year of disappointment by broad-based international equity indexes. As of Monday, the widely followed MSCI EAFE Index was up just 4.35% year-to-date.
The benchmark is up just 1.58% over the past month, a period in which the S&P 500 is higher by 2.27%. Some market observers argue that international stocks and the related exchange traded funds are pricing in concern about President-elect Trump potentially employing punitive tariffs against U.S. trading partners, but others believe there’s still a case for international equities heading into 2025.
Being choosy in the international equity complex is a strategy that can reward patient investors and the VanEck Morningstar International Moat ETF (MOTI ) is one of the ETFs that helps market participants express that selectivity. Year-to-date, MOTI has performed inline with the MSCI EAFE Index. However, the VanEck ETF could be poised for better things in 2025, particularly if the tariff issue proves to be more talk than action.
MOTI Has Bright 2025 Outlook
It’s understandable that investors considering international equities and ETFs like MOTI are jittery about the specter of trade tariffs. However, some experts believe those concerns are overstated. If that view is validated, it could benefit ETFs such as MOTI.
“Tariffs may still rise, but it seems that extreme tariff announcements may be used by Trump as a tool of statecraft to extract actions or concessions, rather than tools of economic policy,” noted Jeffrey Kleintop of Charles Schwab. “It is worth noting that Trump doesn’t have a mandate on implementing tariffs, based on polling data of voters’ intentions.”
Another potential catalyst for international equities in 2025, including MOTI holdings, is the pace at which central banks pare interest rates. In particular, European stocks often proved highly correlated to local central bank rate action as well as related by the Federal Reserve. That’s something to consider, because European stocks are inexpensive and account for approximately half the MOTI roster.
Speaking of Europe, economic data there has been somber. However, it could be poised to rebound next year, possibly providing fuel for a MOTI rally.
“Sentiment may be poised to shift. While on an absolute basis, sentiment remains below average, the November Ifo Business Climate survey for Germany shows that expectations for the future have climbed relative to the assessment of the current situation similar to those seen during the rebounds from both the pandemic of 2020 and Eurozone Debt Crisis of 2011,” added Kleintop. “Both instances preceded a strong rebound in overall sentiment, economic growth, and stock market performance.”
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