Our contributor shares his current outlook on US equities versus European and Japanese stocks, and offers two hedging ideas for the US dollar.
Wisdom Tree Germany Hedged (DXGE) and Wisdom Tree Europe Hedged Small Cap (EUSC)
from Investor’s Edge
We’ve been moving steadily offshore as we find fewer and fewer value stocks in the US. Europe has been our primary venue for finding undervalued equities. While our international investing is focused primarily on Europe right now, I must say that I think the Japanese are finally coming to grips with their economic issues, if not their demographic ones.
Certainly the soaring US dollar has helped this export-driven nation markedly, as has the low price of oil and gas, which Japan must import from elsewhere. But if “Abenomics” takes hold as it seems to be, you can expect that we will consider Japan as part of our international portfolio as well.
I am never completely out of the U.S. markets. Even if I think that’s a good decision, history has shown that it loves to turn on a dime and confuse investors and destroy capital at will. But what I am keeping in the U.S. is going into the strongest sectors like consumer discretionary, health care and technology, as well as into two areas I believe will recover as our population gets back to work: energy and U.S. real estate.
We own a few Euro-stocks outright but mostly we want our investments there hedged against any further rise in the dollar, like our HEDJ is. We are now buying for clients two more that also hedge the dollar: Wisdom Tree Germany Hedged (DXGE) and Wisdom Tree Europe Hedged Small Cap (EUSC). The former holds the giants we know and buy from every day, the latter lesser known but still high quality firms. We’re taking a position in both today.
Joseph L. Shaefer, The Investor’s Edge, www.investorsedge.us, 800-253-2088, April 2015