International Destinations for your Portfolio
Intel’s forecast, today, highlighting their belief that Asian consumers would drive the economic rebound got me thinking. Could international stocks recover quicker and grow faster than domestic U.S. stocks over the next few years? To get a better grasp, I’ve decided to compare the performance of various international ETFs and take a better look.
In the above chart, I’ve charted several iShares International ETFs – FCHI (China), EWZ (Brazil), EZA (South Africa), ECH (Chile), and the S&P 500. This is the performance of the various indexes from the Summer of 2008 until the end of 2008. As has been talked about by many, international diversification (and almost any sort of asset class diversification) failed badly in our unprecedented market slide in 2008. All the indexes fell at least 30% over the course of the last half of the year, only Brazil escaped a near 1.00 beta with the rest of the markets, it decided to fall even further (nearly 60%).
It seems that the harder they fall, the harder they bounce. Brazil and Chile have lead the international rebound of late. (An interesting topic that I’ll have to delve into deeper. For now, those interested might like this Economist article on Chile’s Economy Stimulating and this article on Brazil’s foreign currency reserves.) All in all, it seems that the S&P 500, barely break even on the year, has in fact lagged the rest of the world. It would seem that despite not insulating us from the downturn, international diversification did, in fact, prove a winning strategy over the last 12 months. Let’s take a look.
As you can see, while the markets traded roughly in the same direction over the last year, clear winners and losers can be found. The S&P trails every foreign index in the set other than Brazil. And, interestingly enough, despite a 40% run in the first half of 2009, Brazil remains a laggard in this interational grouping.
What does this tell us? Well, for one, it would seem that venturing forward and looking for some stocks with international exposure is a prudent thing to do. Where should you look? Well, it would seem that the South American economies are the flavor of the day so I’d start there. What are your favorite international picks?
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