Global economic engines
may help drive your portfolio
largest companies, but that optimism and genuine reform are trickling
down throughout the economy.
How else do people signal their confidence
in an economy? Well, in part, by visiting
the region. Here again, we see evidence
of real improvements.
International tourism is up across both
Europe and Japan. In the first nine months of
2013, Europe saw a 6% jump overall, with
a big spike in the UK, where visitorship was
up 18%. Even beleaguered Greece welcomed
15% more foreign visitors. Japan notched up
an impressive 23% increase.3
That's a lot of
people infusing these economies with cash
and economic stimulation.
Even if your plans don't include a
vacation in Europe or Japan this year, you
can still participate in these economies by
investing in them. Yes, there are risks, which
is why it's best to invest only as part of a
diversified portfolio. For most investors,
professionally run, actively managed mutual
funds provide an appropriate way to access
the potential growth of international markets.
If you'd like to learn more about opportunities
in Europe, Japan, or any international market,
please speak with us. We can help you review
the opportunities and select specific funds
based on your objectives, time horizon, and
1 To Dec. 20, 2013. Source: Morningstar.
2 The Yomiuri Shimbun,
The Japan News, Dec.16, 2013.
3 UNWO Tourism Highlights,
For six long years, investors have worried
that the crisis in Europe was virtually
unfixable. Fears that the Euro itself would be
dissolved only added to the malaise. But
dramatic improvements in Japan and across
much of Europe have combined to make
many investors feel more optimistic than ever.
Is it even possible that Europe and Japan,
two of the most downtrodden economies of
the recent past, are now ripe with potential?
Let's take a look at some of the signs and key
indicators that may provide some insight into
the potential of these regions.
The European Union is stabilizing, the economy
is growing, and securities in the Eurozone
may be underpriced relative to the U.S. and
other developed markets. Even the so-called
PIIGS of Europe (Portugal, Italy, Ireland,
Greece, and Spain) are showing signs of, if
not actually gaining traction, at least no longer
holding back the rest of the continent.
In fact, as a group, European equity funds
have returned an average 23.1% for 2013,1
their best showing since 2006.
Meanwhile, in Japan, the new prime
minister has had more success kick-starting
the economy over the last 12 months than
the nation has seen over the past 20 years.
Exports are up, consumer spending is up,
and infrastructure spending is way up and
will continue to grow as the clock ticks
toward the 2020 Olympics in Tokyo. The list
of improvements is so long and dramatic, the
global press has dubbed Prime Minister Abe's
As 2013 drew to a close, the Bank of
Japan's closely watched Tankan survey added
even more fuel to the economic fire when it
revealed that business sentiment among both
small and mid-sized companies was positive
for the first time in 22 years.2
This suggests that Abenomics is not just taking hold
In addition to growth potential, adding international funds to your portfolio can enhance your portfolio's diversification. As you can see from the charts below, Canada's markets are dominated by the
financials and energy sectors, while Europe has significant exposure to
healthcare and industrials
and Japan to information technology.
Source: MSCI Canada Index (gross returns, Canadian dollar), MSCI Europe Index (gross returns, euro), and MSCI Japan Index
(gross returns, Japanese yen), November 2013