Global Revenue: A Dominant Factor In Early 2017

For all the talk of President Trump’s efforts to “make America great again,” one of the most interesting features of the market in 2017 has been how the best performers across global equities have been anything focused internationally—whether emerging markets leading regions higher or even U.S. multinationals outperforming U.S.-focused market segments.

WisdomTree U.S.-Focused Equity Funds: YTD Performance as of 4/30/17

WT Equity Funds  YTD 4/30/17

The chart above details the 2017 performance across all U.S.-focused WisdomTree equity exchange-traded funds (ETFs). Here’s what strikes me at first glance: the driving factor was that the more global the revenue base, the better the performance. This is illustrated by comparing three best-performing WisdomTree strategies to three worst-performing strategies through April 30, 2017.

  • Global Revenue Factor: WisdomTree’s top-performing U.S. equity ETFs through the month of April focus on either U.S. export and multinational stocks or large-cap global-oriented stocks. The weighted average revenue of these stocks in the WisdomTree U.S. Export and Multinational Fund (WEXP) is predominantly foreign (approximately 60% revenue outside the U.S.), and this is WisdomTree’s most foreign-oriented basket of U.S. stocks, given the screens it employs to remove stocks focused on the U.S. economy. WisdomTree’s second-best-performing Fund was a quality dividend growth ETF, the WisdomTree U.S. Quality Dividend Growth Fund (DGRW), which also has a relatively high share of revenue coming from a global basis because of sector concentrations that are under-weight in sectors including Utilities, Telecom, REITs, and Financials, all of which tend to be focused in U.S. markets. Its exposures in cyclical sectors—Consumer Discretionary, Technology, Industrials—are performing well, as is its Health Care exposure. 
  • Small-Cap Factor: WisdomTree’s three worst-performing U.S. equity ETFs were all centered on the U.S. small-cap market, and small caps tend to be the most sensitive to local economic prospects. After Trump’s election in November, small caps went on a big run through the end of the year. Their outperformance largely reversed in the first four months of 2017.
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Disclosure: Neither WisdomTree Investments, Inc., nor its affiliates, nor Foreside Fund Services, LLC, or its affiliates provide tax advice. All references to tax matters or information provided ...

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