At a recent ideas lunch with a few investors, as is often the case, a number of individual stock ideas were presented. However, this time there was one investor who presented two ETFs including iShares MSCI Chile ETF (ECH) and iShares MSCI Brazil ETF (EWZ). The idea was that both Chile and Brazil will have general elections in late 2025 and 2026 respectively and if these countries select someone like Javier Milei, as the Argentinians did, we could see a big turnaround in their economies.
Two other tailwinds that could contribute to this trade would include money flows out of U.S. markets and a potentially weak U.S. dollar. If the latter were to happen, then exposure to international markets without hedging currency risk would be the way to go. WisdomTree (WT) also provides some currency-hedged ETFs if investors would prefer to bet on specific countries or regions like India, Japan, and Europe without betting against the U.S. dollar.
As I contemplated this idea, I realized that there were two common themes to the ETFs my friend mentioned. Both ETFs were iShares ETFs, which is an ETF family owned by BlackRock (BLK) and the indexes underlying these ETFs are provided by MSCI (MSCI). The MSCI part made a little light bulb go off in my head. Here was an option to get broad-based international exposure without betting on election outcomes or other events in specific countries. The only parts of the thesis that needed to hold true were outflows from U.S. markets into international ones and a weakening U.S. dollar.