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For investors, there’s something to be said for favoring the good old U.S.A. and American ETFs. Over the past three years, the S&P 500 is higher by 23.5%, while the MSCI EAFE Index and the MSCI Emerging Markets Index are lower by 5.9% and 5.2%, respectively.
Yes, some of the best-performing U.S. sectors have ample international exposure — with technology being a prime example of that. Likewise, healthcare, another of this year’s leading groups, generates the bulk of its revenue within the confines of U.S. borders.
Thar said, though, what is happening in 2020 is underscoring the case for American ETFs. While the major domestic equity benchmarks aren’t immune to the novel coronavirus shocks, the pandemic and sagging oil prices are punishing emerging markets benchmarks while global investors are finding little reason to embrace ex-U.S. developed markets despite the value propositions offered in some of those regions. In other words, international ETFs are contrarian plays and that’s not always a positive.
So, for those looking to embrace the home-country bias, here are some American ETFs to consider:
American ETFs to Consider: Health Care Select Sector SPDR (XLV)
Expense ratio: 0.13% per year, or $13 on a $10,000 investment
The Health Care Select Sector SPDR is home to venerable names, including Johnson & Johnson (NYSE:JNJ), Merck (NYSE:MRK) and Pfizer (NYSE:PFE). While those are multi-national companies, the fact is the domestic healthcare industry generates about $7.80 of each of its $10 in sales here in the U.S.
That data point pertains to more than just blue-chip pharmaceuticals companies. Not surprisingly, healthcare services providers — XLV’s third-largest industry weight — and biotechnology companies are heavily dependent on the U.S. for the bulk of their top line growth.
At a time of an international pandemic, and the potential for heightened trade tensions as a result of the coronavirus scenario, healthcare’s domestic exposure is an advantage for investors as it’s one of a few sectors forecast to deliver stout earnings and revenue growth this year. In fact, the broader healthcare sector should deliver earnings and top line growth of 9% and 14%, respectively this year, according to FactSet.
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