Following the stock market crash triggered by the COVID19 crisis in March 2020, the U.S. dollar started to decline compared to the basket of major currencies (Chart 1).
The declining dollar makes international investments attractive for U.S. investors. We think that if the dollar continues to decline in 2021, the Fidelity Diversified International Fund (FDIVX) will continue to perform well (Chart 2).
Emerging markets have outperformed developed markets in Europe and the U.S. since the market recovery started in May of 2019. The Fidelity Emerging Markets Fund (FEMKX) has a stellar long-term track record and may be a great way to play the continuation of this trend (Chart 3).
For aggressive investors, the rapid growth of Asian markets can offer an appealing opportunity. Asian markets declined to a lesser extent during the COVID19 market crash than the U.S. market and recovered faster in the aftermath. The chart of the Fidelity Southeast Asia Fund (FSEAX) shows how strong and steady this trend has been (Chart 4).
As a word of caution, we’d like to remind our readers that in our view, global stock markets are highly overbought right now due to the combination of large fiscal stimuli, and dovish monetary policy. Consequently, we anticipate a correction in the near future. However, we think that the trends of relative outperformance by international markets can continue in 2021, and investors will likely have an opportunity to buy at lower prices.
Quantitative Easing in Europe and in Japan has started to make a positive impact on equity prices in developing markets. In our view, one of the best ways to participate in this long-term trend is by investing in the Fidelity Diversified International Fund (FDIVX). FidelitySignalissued a BUY signal for the fund on February 8 and the fund was included in our Diversified Model Portfolio, as of that date.
The potentially stabilizing U.S. dollar and commodity prices, and the prospect of world-wide economic recovery in 2016 are making emerging market investments attractive again to investors seeking growth.
The Fidelity Southeast Asia Fund (FSEAX) provides a solid way to participate in the Chinese and other Southeast Asian markets. FidelitySignalissued a BUY signal for the fund on January 23 and the fund was included in our Aggressive Growth Model Portfolio, as of that date.
For investors seeking broad diversification across emerging markets including Southeast Asia, Eastern Europe and Latin America, the Fidelity Emerging Markets Fund (FEMKX) is our top rated choice. FidelitySignal issued a BUY signal for the fund on April 7 and the fund was included in our Megatrends Model Portfolio, as of that date.
The prospect of worldwide economic recovery in 2015 is already making investors rethink their diversification strategy. Equity markets often anticipate economic changes 6 to 12 month into the future, as market participants are taking positions ahead of time.
One of the best ways for conservative investors to participate in the renewed interest in international markets is via the Fidelity Diversified International Fund (FDIVX). FDIVX invests 58% of its assets in Europe, but Japan and Emerging Markets carry large weightings, as well. FDIVX also invests 12% of its assets in the United States.
From the technical analysis perspective, the two-year chart of FDIVX shows a strong bullish trend that was interrupted by a correction only last June. For most of 2014 the fund moved sideways until the recent breakout to a new high:
Both the iShares Spain ETF (EWP, last change: 1.38%) and the iShares Italy ETF (EWI, last change: 0.94%) broke above their respective down trendlines and show increasingly bullish action. Should this move gain momentum, investments in European markets can outperform investments in Asia and Latin America for the rest of 2012.