"When you own this ETF, you're betting on the euro, yen, pound, and Australian dollar against the U.S. dollar. If the dollar strengthens, your returns get squeezed even when underlying stocks perform well. J.P. Morgan analysis suggests the dollar could weaken early in 2026 before rebounding in the second half as rate cuts take hold in Europe. A weaker dollar boosts returns when foreign earnings translate back into dollars."
"Dollar strength creates a headwind that can turn a winning year abroad into a losing one at home. Watch the DXY dollar index weekly. Major moves above 105 historically pressure international returns, while readings below 100 support them. Federal Reserve policy statements and European Central Bank rate decisions are your early warning system. When rate differentials narrow between the U.S. and Europe or Japan, the dollar typically weakens, benefiting IEFA holders."
IEFA tracks roughly 3,600 stocks across developed markets in Europe, Japan, and Australia and manages about $160 billion with a 0.07% expense ratio. The fund returned 35% over the past year and is up 3% year-to-date in 2026. Currency movements, particularly the U.S. dollar versus the euro, yen, pound, and Australian dollar, represent the largest macro factor for returns. Central bank rate decisions and rate differentials drive dollar direction. The ETF’s sector and valuation mix—heavy in pharmaceuticals, industrials, and financials and lighter in technology—shapes opportunity and risk.
Read at 24/7 Wall St.
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