Yahoo Finance New American index seeks to avoid foreign threats and influences
It’s been a tough year so far for markets all over the world.
Just about every major global index is down, with some – notably, the Shanghai Composite (000001.SS) and the Nikkei 225 (^N225) – getting pummeled year-to-date. The S&P 500 (^GSPC), often used as the benchmark for U.S. large cap portfolios, is holding on by its fingertips, up just a fraction of 1%.
But even the ultimate American index has more exposure to the global economy than meets the eye. Nearly half of the combined revenues for all the companies in the S&P 500 come from outside the United States.
European index-maker STOXX recently launched an index for those looking to invest in—or hedge—a pure-play in the U.S. market. The STOXX True Exposure USA 100% Index is made up of companies that get their revenues solely from the United States. That leaves out quite a few industries, and its biggest sectors are utilities, retail, banks, and real estate.
Top 5 holdings of STOXX True Exposure USA 100% Index
The new index’s simulated returns, both this year and since the 2009 market bottom, have outpaced the S&P 500.
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“There has been for sure a lot of volatility in the markets this year driven by geopolitical instability and some of the news coming out of Europe in the beginning of the year, including the Brexit referendum,” said STOXX CEO Mattteo Andreetto. “We saw at the beginning of the year the effect having a China exposure to U.S. companies. The S&P 500 was down nearly 450 basis points more than the STOXX 100% U.S.A. True Exposure.”
But since the U.S. is dependent on foreign trade, a pure-play index may not be entirely reflective of the American economy. Nonetheless, the index serves a purpose, according to Andreetto.
“It really depends what you're after,” he said. “If you're after an instrument that gives you exposure not only to U.S. companies that are listed in the U.S. but also generates vast much of the revenues domestically, yes, this is the best instrument.”
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