On the whole, foreign equity indexes did not fare any better than their U.S. counterparts in April and have remained under pressure in early May. In part that's due to recent strength in the U.S. dollar, writes J.D. Steinhilber, founder of ETF newsletter and investment management firm Agile Investing.
As of May 15th, the foreign stock ETFs in our model portfolios – the MSCI EAFE Fund (ticker: EFA), the MSCI Japan Fund (ticker: EWJ) and the MSCI Emerging Markets Fund (ticker: EEM) – are 7.3%, 9.2% and 10.4% off their highs, respectively. [Note: Agile Investing also uses VWO for emerging markets.]
By comparison, the S&P 500 is 6.1% off its highs. Given the relatively attractive valuations of international stocks, investors who are underweight in international stocks should consider taking advantage of price corrections of this magnitude to diversify their stock exposure.
A frequent point of discussion with respect to asset allocation policy is how much of the equity exposure in a portfolio should be devoted to foreign stocks. There is no “right