A deeper examination shows most single-country ETFs—particularly those with smaller undiversified economies—have been stung by collapsing industry sectors within their local economies. For example, Greece relies heavily on shipping, tourism and transportation, and all three sectors have been clobbered by pandemic-related shutdowns. Likewise, Australia—a big commodity exporter—has experienced lower demand for commodities.
While it’s impossible to know whether stocks from China and the U.S. will continue to do well on a relative basis and extend their divergence versus global peers, we know both countries are more diversified economically compared to many other countries. The question becomes how resilient are the Chinese and American economies? We’ll find out soon enough.
Ron DeLegge is founder and chief portfolio strategist at ETFguide, and is the author of “Habits Of The Investing Greats.”