Best ETFs For 2018: IShares Emerging Markets Dividend ETF Is Still In The Race
But we still have a long way to go in 2018, and tech is starting to show signs of breaking down as we finish out the quarter. I expect my pick - the iShares Emerging Markets Dividend ETF (NYSEARCA:DVYE) to ultimately take the crown. The U.S. market has been the undisputed winner of the post-2008 bull market. But with that outperformance has come major overvaluation. The U.S. market is the most expensive major market in world based on the cyclically adjusted price/earnings ratio, or “CAPE” (only tiny Denmark and Ireland are more expensive).
The U.S. market trades at a CAPE of 31 … which is the level it reached in late 1997, in the midst of the dot com bubble. Meanwhile, emerging markets are downright cheap. As a sector, emerging markets trade at a CAPE of less than 18, and many individual countries are even cheaper.
Sometimes cheap stocks are cheap for a reason, and emerging markets have certainly had a rough decade. Below-average economic growth in America and Europe sapped export demand, weak energy prices hit commodity-dependent countries and political unrest has been a nagging issue, particularly in Latin America. But something funny happened in 2016. While the bad news headlines kept dribbling in, emerging market stocks finally started trending higher.
The bad news had finally been priced in, and the last seller had thrown in the towel, so to speak. And as we wrap up the first quarter of 2018, I believe this move is just getting started. What Could Go Wrong, As I write this, the market is in sell-off mode, in part due to fears that U.S. China could snowball into a bona fide trade war. Now, I don’t see this happening.
President Donald Trump is known to make a lot of noise before ultimately backing off. And there is a limit to how many trade barriers he can erect without getting Congress on board … and that’s not looking particularly likely at the moment. But, let’s say I’m wrong and this nascent trade war gets out of hand.
That would be very bad news for emerging market economies that depend disproportionately on exports to the West. Well, that’s not the story Mr. Market is telling. This tells me that the stock correction has more to do with technical factors than a true belief in an impending trade war. DVYE is fairly concentrated in “Greater China,” with 25% of its portfolio invested in Taiwanese stocks and another 11% in Chinese stocks.
But another 16% is allocated to Russian stocks, and Brazil and Thailand round out the top five at 9% each. Overall, 15 emerging-market countries are represented. As a dividend-focused ETF, it’s not surprising that utilities are the largest sector with 15% of the portfolio. But information technology isn’t far behind at 14%, and the ETF has sizable exposure to real estate. So, DVYE gives you decent diversification both globally and across sectors. If, like me, you think the U.S. And DYVE allows you to get paid a handsome 4.5% in dividends while we wait for this theme to unfold.
630 million have already got 2018 off to quite a start, according to Reuters. 200 billion worth of deals this year. Sector innovation is just as intense. In fact, in late 2017, the FDA approved the first CAR-T cell therapy that can genetically alter a person’s own cells to fight against cancer - a milestone that ‘s expected to change treatment options as we know it.
This latest one is approved for children and young adults for an aggressive type of leukemia, B-cell acute lymphoblastic leukemia. In short, it’s not smart to bet against biotech or pharmaceutical names. The iShares NASDAQ Biotech ETF tracks the investment results of biotech and pharmaceutical stocks listed on the NASDAQ.
