Emerging-markets ETFs are not interchangeable just because they share a broad category. An all-country benchmark such as MSCI Emerging Markets IMI can look very different from an ex-China version once you examine country weights, sector exposure and the role of state-influenced companies. For investors using the asset class as a diversification tool, those construction differences matter as much as the headline label.
China exclusion is a portfolio decision, not just a geopolitical footnote. Removing the largest market in many EM indexes can reduce exposure to one set of macro risks, but it also changes how much the fund participates in China-linked supply chains, consumer trends and technology leadership. That means the return drivers of an ex-China fund may diverge meaningfully from a broader EM product over a full cycle.
Fees and implementation also deserve attention. Actively managed EM ETFs may have wider discretion to shift between countries, industries and individual holdings, but investors should still compare expense ratios, portfolio turnover and trading spreads. In less liquid markets, the ability to trade efficiently can matter as much as the published fee, especially when markets are volatile or sentiment changes quickly.
The strategic question is how much EM exposure belongs inside the whole portfolio. U.S. investors often already have heavy domestic equity exposure through large-cap growth, so adding EM can improve regional balance, but it also introduces higher currency, governance and policy uncertainty. Rebalancing back to target weights can help keep that tradeoff intentional rather than accidental.
Is the U.S. consumer running out of steam? Recent data suggests that might be the case. Research from
American Century Investments points out three key issues sapping the spending power of the U.S. consumer. Those factors may add to the case for foreign diversification in an area like emerging markets, for example.
See more: Consider Active Inflation ETF AVIE as Inflation Persists
Firstly, it may be worth breaking down how the U.S. consumer is running out of steam. Wage growth has dropped since peaking in 2022, per American Century Investmentsโ research. At the same time, savings have dropped since pandemic-era peaks in savings. Finally, discretionary spending is slowing down too, in perhaps the most direct example of consumer troubles.
Of course, consumer issues alone arenโt the only problem for the U.S. economy. Interest rates look set for a higher for longer period, while inflation, itself an issue, remains a challenge for growth too.
That may inspire investors to consider diversifying away from the U.S. Emerging markets could present an appealing option in doing so. Emerging markets have largely seen their central banks already finish their rate cycle response to the pandemic. Whatโs more, diversifying supply chains look set to benefit some of those nations.
American Century Investmentsโ Avantis Investors brand offers two different ETFs that look at the space. The
Avantis Emerging Markets Equity ETF (AVEM) presents one option. AVEM charges 33 basis points (bps) to actively invest. It looks to outperform the MSCI Emerging Markets IMI Index. AVEM has returned 14.4% over one year per Avantis Investors data.
Investors can also consider the
recently launched Avantis Emerging Markets ex-China Equity ETF (AVXC). China is facing its own economic problems worse than those presented here in the U.S. AVXC looks into emerging markets but excludes China. It charges the same fee as AVEM.
Taken together, the two strategies offer one option to deal with a lagging U.S. consumer. Should that portend more issues for the overall U.S. stock market, diversifying with either AVEM or AVXC or both could appeal.
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For more news, information, and strategy, visit theย Core Strategies Channel.
https://www.etftrends.com/core-strategies-channel/us-consumers-run-out-steam-look-emerging-markets/
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