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ETFs in Focus as IMF ups Global Growth Forecast

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Global economic activity seems to be picking up as the International Monetary Fund (IMF) estimates 3.6% and 3.7% growth in 2017 and 2018, respectively, compared with 3.2% in 2016.

The IMF raised its forecasts from the estimates released in April 2017 with easing global macro tensions and accelerating growth globally. With global economic recovery, consumers are growing more optimistic about their future income, which in turn is leading to an increase in consumer spending.

Report Specifics

Despite the U.S. economy recording strong growth of 3.1% in the second quarter, IMF expects the country's economy to grow 2.2% in 2017 and 2.3% in 2018, down from April's forecasts of 2.3% and 2.5%, respectively. The primary factor leading to this downgrade was IMF's lack of confidence in President Donald Trump's ability to pass the promised tax reforms, the primary driver of the stock markets since the 2016 elections (see Full Report here ).

The IMF expects the UK to grow 1.7% this year, 0.3% lower than its April forecast. The IMF is concerned with the potential negative externalities caused by Brexit talks and UK's relationship with the EU once a formal divorce goes through.

Eurozone, Japan and China are expected to grow 2.1%, 1.5% and 6.8%, respectively this year. Among the G7, IMF predicts the highest growth for Canada, at 3% for 2017, primarily owing to the relative stability in oil prices (read: China ETFs Rally After Week Long Holiday ).

Emerging markets and developing economies have performed quite well in the recent years. However, the IMF lowered India's growth forecast to 6.7% in 2017 owing to the headwinds caused by demonetization and GST (read: India ETFs Rally after Central Bank Holds Rates ).

Risks Involved

Specific downside risks as a result of growing protectionism in the world, rising borrowing costs in places like the United States, rapid credit growth in China due to the credit stimulus by the government and the rollback of financial regulations are concerns, per IMF.

Considering the current scenario, let us discuss the following ETFs focused on providing a geographically diversified exposure to the equity markets.

Vanguard Total World Stock ETFVT

This fund is one of the broadest options available in the equity market, offering a global diversified exposure to investors at a relatively cheaper expense ratio.

It has AUM of $9.3 billion and charges a paltry 11 basis points in fees per year. From a geographical perspective, its top three allocations are the U.S., Japan and UK, with 52.1%, 8.2% and 6.0% exposure, respectively (as of Aug 31, 2017). From a sector look, it has significant exposure to Financials, Technology and Consumer Cyclical, with 18%, 17%, and 12% allocation, respectively. Apple Inc AAPL , Alphabet Inc GOOGL and Microsoft Corp MSFT are the top three holdings of this fund, with 1.8%, 1.2%, and 1.1% allocation, respectively (as of Aug 31, 2017). The fund has returned 17.4% year to date and 18.4% in a year (as of Oct 10, 2017). VT currently has a Zacks ETF Rank #3 (Hold) with a Low risk outlook.

iShares MSCI ACWI ETFACWI

This fund is one of the popular options available in the equity market, offering a balanced diversified exposure to global large-cap blend equities.

It has AUM of $7.9 billion and charges 33 basis points in fees per year. From a geographical perspective, its top three allocations are to the U.S., Japan and UK with 50.6%, 7.6% and 5.2% exposure, respectively (as of Oct 9, 2017). From a sector look, it has significant exposure to Financials, Information Technology and Consumer Discretionary with 18.6%, 17.7%, and 11.6% allocation, respectively (as of Oct 9, 2017). Apple Inc, Microsoft Corp and Facebook Inc FB are the top three holdings of this fund, with 1.9%, 1.3% and 0.9% allocation, respectively (as of Oct 9, 2017). The fund has returned 17.7% year to date and 18.6% in a year (as of Oct 10, 2017). ACWI currently has a Zacks ETF Rank #3 with a Low risk outlook.

iShares Global 100 ETFIOO

This fund is one of the most popular options available in the equity market, offering a diversified exposure to global mega-cap equities (read: 5 Winning ETF Strategies for Q4 ).

It has AUM of $1.8 billion and charges 40 basis points in fees per year. From a geographical perspective, its top three allocations are to the U.S., UK and Germany with 60.8%, 10.4% and 6.2% exposure, respectively (as of Oct 9, 2017). From a sector look, it has significant exposure to Information Technology, Financials and Health Care, with 23.2%, 16.2% and 13.2% allocation, respectively (as of Oct 9, 2017). Apple Inc, Microsoft Corp and Amazon.com Inc AMZN are the top three holdings of this fund, with 6.9%, 5.1% and 3.4% allocation, respectively (as of Oct 9, 2017). The fund has returned 16.7% year to date and 19.3% in a year (as of Oct 10, 2017). IOO currently has a Zacks ETF Rank #3 with a Low risk outlook.

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Amazon.com, Inc. (AMZN): Free Stock Analysis Report

Facebook, Inc. (FB): Free Stock Analysis Report

Alphabet Inc. (GOOGL): Free Stock Analysis Report

Apple Inc. (AAPL): Free Stock Analysis Report

Microsoft Corporation (MSFT): Free Stock Analysis Report

ISHRS-MSCI ACWI (ACWI): ETF Research Reports

ISHARS-GLBL 100 (IOO): ETF Research Reports

VANGD-TOT W STK (VT): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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