Developed ex-US ETF Climbs 9% YTD on Health Care, Financials Strength
Through February ACWX is up ~9% year-to-date, outpacing the S&P 500’s sub-1% gain as emerging markets drive developed ex-US strength. Sector drivers include resilient health care and financials, but U.S. deregulation, potential rate cuts and record CAPEX may narrow the gap later this year.
1. Year-to-Date Performance Divergence
ACWX, a proxy for developed ex-US equities, has gained roughly 9% this year compared with the S&P 500’s sub-1% rise through mid-February. Emerging markets, which carry a significant weight within ACWX, have driven much of this outperformance against U.S. benchmarks.
2. Sector Composition Differences
The fund’s heavier exposure to health care and financials has provided a buffer against volatility, as those sectors have held up better than technology and communication services, which dominate U.S. indexes. This sector mix highlights divergent regional drivers, with international markets benefiting from defensive and income-oriented stocks.
3. U.S. Market Tailwinds and Future Risks
Several factors could tilt the balance back toward U.S. equities, including deregulation efforts, prospects for interest rate reductions in the second half of the year and unprecedented capital expenditure spending at home. Historical patterns suggest that after multi-year rally streaks, subsequent returns can be muted, signaling potential challenges for further international outperformance this year.