Virtually all of the teams that made it through to this summer’s World Cup represent nations that also have a single-country ETF. For traders and investors who are also fans of the World Cup action, let’s take a look at the bracket alongside the ETF price charts to see who might win the ETF finals.
More than half of the teams that made it to the knockout round of 16 have ETFs associated with their respective countries. These countries include Canada, Brazil, Paraguay, Morocco, Norway, France, Mexico, England, Belgium, the United States, Spain, Portugal, Switzerland, Egypt, Argentina, and Colombia.
Of the 16 finalists, 11 have ETFs, including Morocco, which has a more-than-10% weighting within the VanEck Africa Index ETF (AFK), a pan-Africa fund. While the S&P 500 (SPY) and other U.S. indexes tend to span a wide range of sectors and industries, most country economies are more narrowly focused. This narrow focus tends to make them tactically attractive at times.
For example, France’s equity index reflects a highly mature, heavy allocation to industrials and luxury goods that is increasingly vulnerable to a global consumer spending decline, as well as regional energy inputs. Conversely, North African and Middle Eastern frontier trackers get their upside potential from the long-term prospects for asset-backed growth, entirely decoupled from Western technology companies and their margin compression issues.
Spain’s market architecture is heavily weighted toward banking conglomerates and defensive multinational utilities, providing a high dividend yield versus most other markets. Belgium, which defeated the U.S. earlier this week, acts as a proxy for specialized materials, chemical processing, and European consumer staples. Norway’s index is intensely concentrated in oil, natural gas, and marine harvesting, so it is highly correlated with physical supply shocks and global commodity scarcity.
The United Kingdom’s iShares MSCI United Kingdom ETF (EWU) is selling at just 17x trailing earnings. However, this could be a value trap, since it is dominated by legacy banks and defensive multinationals lacking organic growth drivers. Switzerland represents a safe-haven quality factor, packed with globally diversified healthcare, consumer staples, and financial giants that operate with significant pricing power.
Now, let’s take a look at the charts of note. The iShares MSCI Norway ETF (ENOR) has been in a rut, but renewed rumblings in the Middle East are likely to be its savior. It shows a ‘baby’ percentage price oscillator (PPO) crossover to the upside, but from a very low level. This is just a hint, not a major transition to the bull side, but one to watch.
The iShares MSCI Brazil ETF (EWZ) is steadily building a base. Here, it is the pattern of the chart that I like, as the moving averages are still in neutral. On the other hand, Belgium may have won the battle on the pitch, but its price chart looks as if it is preparing for a battle with the bears. After a sharp up move, this lower-volatility country ETF looks increasingly vulnerable.
