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The S&P 500 has gained more than 21% so far this year (as of Dec 12, 2023). The cooling in inflation, a less-hawkish Fed, an AI boom, tech rally and an improvement in the corporate earnings have made this rally possible. Notably, Information Technology takes about 25% of the S&P 500. Hence, a tech rally is instrumental in driving the broader markets (read: What Lies Ahead of S&P 500 ETFs in 2024?).
Meanwhile, Invesco DB US Dollar Index Bullish Fund (UUP - Free Report) is up about 4.7% this year. Moderate strength of the U.S. dollar benefited some emerging market equities a lot this year. Against this backdrop, below we highlight a few top-performing country ETFs of 2023.
Election optimism has boosted the Argentina’s market. Investors positioned themselves in Argentine stocks ahead of the nation’s political cycle. Polls revealed that there was lesser chance of winning for the left-oriented ruling coalition while market-friendly candidate has higher chances of winning the election.
Later on, in late November, Argentina’s market rallied sharply on a historic election result. Libertarian candidate Javier Milei, known for his promise to eliminate numerous government departments and his unusual campaign tactic of brandishing a chainsaw on stage, achieved a resounding victory. This result overwhelmingly defeated the long-standing Peronist coalition, as voters expressed their discontent with the government over years of economic downturn.
Poland's GDP grew 1.5% sequentially in Q3 of 2023, slightly above a preliminary estimate of 1.4% and accelerating from a 0.3% expansion in Q2. Investors remained hopeful on the country’s equity market potential. The National Bank of Poland even cut rates this year, going opposite to what the Fed is doing in America. This was a welcoming move for the Polish stock market.
The National Bank of Poland cut its benchmark rate a quarter of a percentage point to 5.75% in early October, hinting at a drop in inflation despite a still-high rate of 8.2% last month. Inflation was over 18% earlier this year.
WisdomTree Japan Hedged Equity ETF (DXJ - Free Report) – Up 42.8%
Japan ETFs have stayed steady in the recent past. A shift-away from deflation, a still-easy monetary policy and policy easing in China (which is a major trading partner of Japan) led to the equity rally. Notably, the Bank of Japan (BoJ) has raised its median forecast for inflation to 2.8% from 2.5% for the fiscal year ending next March. The bank also projected price gains of 2.8%, up from 1.9% for fiscal 2024, and of 1.7% up from 1.6% for fiscal 2025. BoJ also took a significant step recently by allowing long-term interest rates to rise.
Greece stocks have rebounded in recent months due to fiscal and bureaucratic reforms, upbeat economic data points. Greek economic growth was 5.9% in 2022, way higher than the 3.5% rate in the Euro zone. IMF sees Greek economy growing by 2.5% this year and 2.0% in 2024. This has brightened investor perceptions about Greece. Greece credit rating was also raised to investment grade for first time since debt crisis.
The Mexican economy grew 1.1% sequentially in Q3 of 2023 on, surpassing both the preliminary estimates and the previous quarter's growth rate of 0.9%. It was the eighth successive quarter of expansion in the Mexican economy at the sharpest pace in one year, contributing to the period of resilience to the Bank of Mexico’s aggressive tightening cycle. Due to the strained relationship between the United States and China, many U.S. companies are moving to minimize geopolitical risk by moving their manufacturing to Mexico. This has been another positive for the Mexican market.
VanEck India Growth Leaders ETF (GLIN - Free Report) – Up 30.1%
India has become an investment hotspot in the third quarter. Untapped potential, considerably high growth and global companies’ interest in setting up manufacturing base in India have boosted the country’s equities. China-US geopolitical tensions also veered West’s attention to India – one of the largest Asian emerging markets. If these were not enough, India successfully hosted the G-20 summit in September, showcasing the Indian government's efforts to assume a leading role in global affairs as the West aims to counterbalance China's rising influence.
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6 Country ETFs that Topped S&P 500 in 2023
The S&P 500 has gained more than 21% so far this year (as of Dec 12, 2023). The cooling in inflation, a less-hawkish Fed, an AI boom, tech rally and an improvement in the corporate earnings have made this rally possible. Notably, Information Technology takes about 25% of the S&P 500. Hence, a tech rally is instrumental in driving the broader markets (read: What Lies Ahead of S&P 500 ETFs in 2024?).
Meanwhile, Invesco DB US Dollar Index Bullish Fund (UUP - Free Report) is up about 4.7% this year. Moderate strength of the U.S. dollar benefited some emerging market equities a lot this year. Against this backdrop, below we highlight a few top-performing country ETFs of 2023.
ETFs in Focus
Global X MSCI Argentina ETF (ARGT - Free Report) – Up 50.6%
Election optimism has boosted the Argentina’s market. Investors positioned themselves in Argentine stocks ahead of the nation’s political cycle. Polls revealed that there was lesser chance of winning for the left-oriented ruling coalition while market-friendly candidate has higher chances of winning the election.
Later on, in late November, Argentina’s market rallied sharply on a historic election result. Libertarian candidate Javier Milei, known for his promise to eliminate numerous government departments and his unusual campaign tactic of brandishing a chainsaw on stage, achieved a resounding victory. This result overwhelmingly defeated the long-standing Peronist coalition, as voters expressed their discontent with the government over years of economic downturn.
iShares MSCI Poland ETF (EPOL - Free Report) – Up 45.7%
Poland's GDP grew 1.5% sequentially in Q3 of 2023, slightly above a preliminary estimate of 1.4% and accelerating from a 0.3% expansion in Q2. Investors remained hopeful on the country’s equity market potential. The National Bank of Poland even cut rates this year, going opposite to what the Fed is doing in America. This was a welcoming move for the Polish stock market.
The National Bank of Poland cut its benchmark rate a quarter of a percentage point to 5.75% in early October, hinting at a drop in inflation despite a still-high rate of 8.2% last month. Inflation was over 18% earlier this year.
WisdomTree Japan Hedged Equity ETF (DXJ - Free Report) – Up 42.8%
Japan ETFs have stayed steady in the recent past. A shift-away from deflation, a still-easy monetary policy and policy easing in China (which is a major trading partner of Japan) led to the equity rally. Notably, the Bank of Japan (BoJ) has raised its median forecast for inflation to 2.8% from 2.5% for the fiscal year ending next March. The bank also projected price gains of 2.8%, up from 1.9% for fiscal 2024, and of 1.7% up from 1.6% for fiscal 2025. BoJ also took a significant step recently by allowing long-term interest rates to rise.
Global X MSCI Greece ETF (GREK - Free Report) – Up 36.89%
Greece stocks have rebounded in recent months due to fiscal and bureaucratic reforms, upbeat economic data points. Greek economic growth was 5.9% in 2022, way higher than the 3.5% rate in the Euro zone. IMF sees Greek economy growing by 2.5% this year and 2.0% in 2024. This has brightened investor perceptions about Greece. Greece credit rating was also raised to investment grade for first time since debt crisis.
iShares MSCI Mexico ETF (EWW - Free Report) – Up 30.2%
The Mexican economy grew 1.1% sequentially in Q3 of 2023 on, surpassing both the preliminary estimates and the previous quarter's growth rate of 0.9%. It was the eighth successive quarter of expansion in the Mexican economy at the sharpest pace in one year, contributing to the period of resilience to the Bank of Mexico’s aggressive tightening cycle. Due to the strained relationship between the United States and China, many U.S. companies are moving to minimize geopolitical risk by moving their manufacturing to Mexico. This has been another positive for the Mexican market.
VanEck India Growth Leaders ETF (GLIN - Free Report) – Up 30.1%
India has become an investment hotspot in the third quarter. Untapped potential, considerably high growth and global companies’ interest in setting up manufacturing base in India have boosted the country’s equities. China-US geopolitical tensions also veered West’s attention to India – one of the largest Asian emerging markets. If these were not enough, India successfully hosted the G-20 summit in September, showcasing the Indian government's efforts to assume a leading role in global affairs as the West aims to counterbalance China's rising influence.