Emerging markets ETFs made out big time for the month of May. A whopping $23 billion went into international equity ETFs while $1.6 billion was pulled out of US equity ETFs in May according to a report by ETF (link above).
The main reason investors are doing this is because of valuations. The U.S. equity markets are seen as being way overvalued, especially after the Trump hype wore off and reality set it that the President isn’t going to get much done in terms of tax cuts and health care in 2017.
Emerging Markets ETFs versus US Equity ETFs
The iShares MSCI EAFE ETF tracks a market-cap-weighted index of developed-market securities based in Europe, Australia and the Far East so it’s a good chart to measure emerging markets ETFs. SPY tracks the S&P 500 so it’s a good way to measure U.S. equity ETFs.
Tracking the performance of EFA to SPY over the last month, EFA is up +4.4% while SPY is up 2.2%. The incredible 100% out-performance by EFA over SPY means that a lot of investors are moving money into countries that have a more accommodating central bank policy (rates going down).