Shadows on the Global Exchange

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A certain restlessness has begun to stir amongst investors, a quiet questioning of the American dominion over the markets. The notion of seeking pastures elsewhere – a withdrawal, if you will, from the relentless exuberance of the U.S. – has gained a certain currency. This “ABUSA,” as some are calling it, is not born of simple pessimism, but rather a reasoned, if belated, acknowledgement of certain imbalances.

The S&P 500, still perched precariously near its zenith, bears the air of a grand seigneur, grown accustomed to privilege. Its valuation, inflated by years of easy money and unwavering faith, appears… optimistic, shall we say? And the engine of its recent ascent – a handful of technological behemoths – feels less like a broad-based prosperity and more like a precarious tower built upon shifting sands. Nvidia, Microsoft, Apple… these names resonate with power, yes, but also with a certain fragility. Should their momentum falter, the consequences could be… instructive.

Furthermore, the weakening of the American dollar – a consequence of declining interest rates, a predictable ebb and flow – casts a longer shadow upon domestic equities, while simultaneously illuminating the potential of those beyond our shores. The currents of capital, like the rivers of Russia, seek the path of least resistance, and a stronger foreign currency naturally exerts a gravitational pull. The political winds, too, are unpredictable, and the specter of trade disputes and fiscal uncertainty hangs heavy over the American landscape.

Yet, to abandon the familiar comforts of the American market entirely is a step few are willing to take. The world beyond our borders can appear… opaque, foreign. Thus, the appeal of a diversified exchange-traded fund, a carefully curated basket of international equities, offers a compromise – a means of venturing into the unknown without fully severing ties with the known. Let us consider, then, the Schwab International Equity ETF (SCHF +0.64%), and assess its merits as a potential hedge against the vagaries of the American market.

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The Composition of Shadows

The Schwab International Equity ETF, like a meticulous cartographer, tracks the FTSE Developed ex-U.S. Index, encompassing mid- and large-cap stocks from the developed world, excluding our own. Japan holds the largest share of its holdings (20.6%), followed by the United Kingdom (12.2%), Canada (10.9%), France (8.3%), and Switzerland (7.9%). Notably absent is mainland China, a deliberate omission that speaks volumes about the fund’s cautious approach.

By sector, the fund favors financial institutions (25.4%), followed by industrial companies (18.3%), information technology (10.9%), healthcare (9.3%), and consumer discretionary goods (9.2%). The remaining allocations are distributed among materials, consumer staples, energy, communication services, utilities, and real estate. It holds a substantial collection of 1,498 stocks, including such names as ASML, Samsung, SK Hynix, Roche, and HSBC. Some of these, particularly those hailing from Asia, remain inaccessible to American investors through conventional exchanges, adding a layer of exclusivity.

The FTSE Developed ex-U.S. Index operates on a principle of market capitalization, rebalancing quarterly to reflect the shifting fortunes of its constituent companies. The strong will thrive, the weak will inevitably fade, a natural selection playing out within the confines of the market. Schwab’s ETF, passively managed, simply replicates this index, mirroring its performance with commendable accuracy. Over the past five years, both the ETF and its underlying index have risen by more than 40%, a respectable, if not spectacular, return. The expense ratio remains remarkably low, a mere 0.03%, a testament to the efficiency of passive management.

As of this writing, SCHF boasts a net asset value of $26.40 per share, slightly below its current trading price of $26.60, suggesting a modest premium. The trailing distribution yield of 3.4% offers a modest income stream, a welcome addition in an era of declining interest rates.

A Prudent Venture?

I harbor no illusions about the American market’s inherent strength. To abandon it entirely would be… imprudent. The United States, for all its flaws, remains a powerful economic force. However, to ignore the potential of international stocks would be equally foolish. The world is a vast and complex tapestry, and to focus solely on one corner is to limit one’s perspective. Therefore, I believe that investing in SCHF – even if one remains skeptical of the “ABUSA” thesis – is a prudent hedge against the inevitable volatility of the American market. It is a step towards diversification, a recognition that fortune, like the seasons, is ever-changing.

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2026-02-11 21:46