Through last Friday, the Invesco QQQ Trust ETF (QQQ) has posted a 7.5% gain year-to-date. Driven by the phenomenal gains of the Magnificent 7 it's easy to think that the Nasdaq, and the US market as a whole, is the strongest market around.
But there are other countries, or country ETFs that have actually outpaced the QQQ year-to-date.
Italy, Ireland and Peru country ETFs are actually outpacing the QQQ, and in the case of two of the three, they have performed with lower volatility than QQQ, as measured by standard deviation, according to ETF.com.
QQQ has only had a total return including dividends of 12% from the start of 2022 through the end of last week. That’s a period of just over 27 months.
Memories of the 33% drop in QQQ during 2022 faded quickly, and the so-called “recency effect” is very much in place today. For more than 23 of those 27 months, QQQ was under water, dating back to the market top that started the year in 2022.
So, with that in mind it's interesting to find some ETFs that have offered better returns, without taking on gigantic levels of risk. QQQ’s annualized standard deviation over the past three years is around 22%, a bit below its long-term average.
Looking outside the US, the Italian, Irish and Peruvian single-country ETFs have produced two to four times the return of QQQ since the start of 2022, with standard deviations in the same low to mid 20% range over the past three years.
The iShares MSCI Ireland ETF (EIRL) is up 24% since January 2022. This $120 million ETF was launched in 2010, and the top 10 holdings make up 80% of the fund, which is not unusual for a single country ETF targeting a small nation. It’s largest holding—26%—is the parent company for FanDuel, the popular U.S. gaming business.
As for Italy, the iShares MSCI Italy ETF (EWI) has $425 m in AUM and started back in 1996. Since 2022, it too has handily outperformed QQQ, with a 23% gain. This 25 stock ETF yields 3.1%, has a trailing price-earnings ratio of 10.1x and has a weighted average market capitalization of $40 billion meaning it's a portfolio packed with sizeable companies.
The performance of these two however, is outpaced by the 49% return since the start of 2022, of the $112 million iShares MSCI Peru ETF (EPU), a 15-year-old ETF. While it's not quite a pure play on Peru, its non-Peruvian holdings must have a large business presence in that country. Among its holdings we find some prominent copper mining stocks based in the U.S.
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