One way to avoid or defend against slowing growth in the US is to own positions in other countries, suggests Nick Hodge, editor of Foundational Profits.
There is likely a fund for most any developed country you can think of that owns a basket of stocks based in that country. There are also funds that track countries’ currencies.
With GDP set to start slowing on a quarter-over-quarter basis after very robust growth in multiple quarters in 2021, getting some money out of the country isn’t a bad idea. It can also help you diversify globally.
Let’s start down the global diversification path by buying Switzerland. You can do that with the iShares MSCI Switzerland ETF (EWL). The fund is 50% made up of Nestle, Roche, and Novartis. Another 8% is in the Zurich Insurance Group and UBS — so you really are getting access to the legendary Swiss banks.
The fund does charge a 0.5% expense ratio. But that is relatively cheap and more than made up for with the 1.91% yield at current prices. Plus, if you bought those companies individually in the US you would be paying American Depositary Receipt (ADR) fees anyway. Buy the iShares MSCI Switzerland ETF below $51.00.
I want to buy Asia too — but not China or Korea. We’re going farther south. The Phillipines central bank chief, Governor Benjamin Diokno, had the overnight reverse repurchase rate frozen at 2% for all of 2021. And unlike the Fed here in the US, which is threatening four rate hikes in 2022, Diokno is signaling there won’t be any hikes from the Bangko Sentral ng Pilipinas.
He was named central banker of the year by The Banker magazine. His economy has posted year-over-year growth for two quarters. And Diokno said he wants to see four to six quarters of that before he considers any rate increases.
This year he expects the economy to grow 7%-9% while inflation is running 2%-4%. Both those numbers will likely be better than the US. Plus there is a digital financial revolution occurring in the Philippines. In 2019, only 14% of financial transactions were digital. That hit 20% in 2020 with the virus driving adoption.
The central bank is aiming for 50% by next year. One strategy is simply getting adults a bank account. Only 29% had one in 2019. That’s already up to 53%. And the goal is 70% by next year.
We’re going to buy the iShares MSCI Philippines ETF (EPHE). It holds all the banks, property developers, and large industrial names that are benefiting from the growth. It’s yielding 1.07% and will cost you 0.57% to own. We’re adding it below $31.00.
