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Tuesday, October 21, 2014

More on HEDJ Currency Hedged Europe ETF

 I wrote recently about the strategy of investing in Europe through a currency hedged ETF ticker HEDJ

At ETF,COM an analysis makes the following points:’s important not to become mired in euro pessimism. The important issue for tactical ETF asset allocators is to understand the risks and the opportunities. Heightened central bank activity always creates both. From that perspective, consider a more hopeful investment outlook:
  • The eurozone is not an economic island. Contrary to sagging wages in the West, Asian incomes have been on a tear over the last decade. The OECD forecasts that 80 percent of the growth in middle class spending globally through 2030 will be driven by Asia. European consumer companies are ideally positioned to benefit from this trend, ...
  • Valuations matter. The Eurozone has been accused of “turning Japanese.” While it’s true that the new, dismal normal of the eurozone is sluggish growth and more frequent recessionary relapse, the probability of eurozone stock markets following the Japanese experience is extremely low. Why? Simply because valuation is the best predictor of longer-term returns. During Japan’s epic decline, equity valuations started from lofty levels, and debt was concentrated in the corporate sector. Those conditions are not present in the eurozone today....
  • Currency depreciation has gloriously arrived. ...With major policy divergence between the Fed and the ECB, a new era of currency depreciation is upon us (see Hahn’s April 2014 piece on, “Position Now For a Weaker Euro”). Looking toward next year, the benefits of a weaker euro and, potentially less austerity, will feed through into the data and show up as improved profits. 

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