The Great American Stock Exodus: When U.S. Markets Lose Their Crown - InvestTalk Recap

Podcast: InvestTalk

Published: 2026-02-25

Duration: 44 min

Summary

This episode dives into the declining dominance of U.S. markets as investors seek opportunities in emerging markets like Brazil. It highlights the factors driving this shift towards global investing.

What Happened

In this episode of InvestTalk, host Luke Guerrero discusses the shift in investor focus from U.S. markets to emerging markets, particularly Brazil. He emphasizes that while U.S. markets have traditionally held a crown in global investing, there is a noticeable trend of capital flowing towards international opportunities. Guerrero notes that the iShares MSCI Brazil ETF (EWZ) is becoming increasingly appealing to investors looking to diversify their portfolios away from U.S.-denominated assets.

Guerrero explains that the EWZ ETF consists of large and mid-cap companies from Brazil's B3 exchange, with specific diversification requirements to mitigate risk. He points out that the costs associated with investing in emerging markets ETFs are generally higher due to the complexities of participating in local markets. Despite these costs, Guerrero reassures investors that opportunities in Brazil and other emerging markets are still available, as many factors, including currency exchange dynamics and overall demand, are likely to drive future returns.

Key Insights

Key Questions Answered

What is the iShares MSCI Brazil ETF EWZ?

The EWZ is an exchange-traded fund that includes a diverse mix of large and mid-cap companies listed on the B3 exchange in Brazil. It is structured to comply with U.S. Internal Revenue Code requirements, which include limits on issuer concentration and overall diversification. This ETF has approximately 48 holdings and reconstitutes quarterly, ensuring that it maintains its diversification standards.

Why are investors moving towards Brazilian markets?

Investors are increasingly drawn to Brazil as it is seen as a solid emerging market, especially in comparison to U.S. markets. The past year's performance has shown that international markets have been performing well, prompting many to seek exposure to countries like Brazil and India as part of their investment strategy. This shift is driven by a desire to diversify away from U.S. dollar-denominated assets and to take advantage of favorable conditions in these countries.

What are the costs associated with investing in emerging market ETFs?

Investing in emerging market ETFs like EWZ tends to be more expensive than their U.S. counterparts. For instance, EWZ has an expense ratio of 59 basis points, which is significantly higher than the ultra-low costs of U.S. large-cap funds. The higher costs are attributed to the complexities of investing in local markets, as these ETFs often do not purchase American Depository Receipts (ADRs), and instead directly participate in local exchanges.

What factors are influencing the shift towards international investing?

The shift towards international investing is influenced by several factors, including the desire for diversification from U.S. markets, differences in currency dynamics, and the general demand for emerging market assets. Investors are increasingly recognizing that the growth potential in countries like Brazil and India may offer better returns compared to the stagnation seen in U.S. markets.

How is the current economic climate affecting U.S. trade deficits?

Despite the implementation of tariffs, the U.S. trade deficit has not shown signs of shrinking. In the podcast, Guerrero hints at upcoming discussions about why tariffs are not effectively reducing the deficit and how recent Supreme Court rulings may impact businesses regarding refunds. This ongoing situation indicates the complexities of international trade and economic policies in the current climate.