2024-06-11 04:50:44 ET
Summary
- EWA offers exposure to Australian large- and mid-caps, with a tilt toward financials and materials, resulting in a more comfortable P/E than that of the S&P 500.
- The issue is that Australia's economic growth is anemic, while inflation might require more action from the RBA. All these do not look bullish for stocks.
- EWA's past performance leaves a lot to be desired, with the 2010s and 2020s being especially challenging as it trailed SPY, delivering higher volatility.
- I believe the existing challenges warrant caution.
An obvious question investors are facing when the market is at or close to an all-time high is what to do next. Momentum investors would likely start buying aggressively, as this is what their factor of choice is all about. For value factor enthusiasts, there are a few possible steps, and one of the options is to venture outside of the country to find discounts they will be comfortable with. For example, they might explore opportunities in a resource-rich, developed economy, and Australia immediately springs to mind. The country is a low-P/E haven with stupendous iron ore, copper, natural gas, and other resources. One of the exchange-traded funds that might be considered for comfortable exposure to that treasure trove is the iShares MSCI Australia ETF ( EWA ), which was incepted in 1996 and now has $1.66 billion in net assets....
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EWA: Anemic Growth And Inflation Challenges Warrant Caution