HEWJ ETF

The Nikkei suffered its worst ever one-day slump this morning. There are plenty of technical efforts, and it might have been a perfect storm of slightly negative data that agglomerated together into poor sentiment, but Sahm's Rule looms. We think the primary driver of the declines in Japan, at least to the extent that they can be justified, comes down to the higher unemployment in the US.

The iShares Currency Hedged MSCI Japan ETF has successfully taken advantage of the rise in Japanese indices while avoiding the depreciation of the Yen. The ETF benefits from a weak Yen, particularly in the automotive and industrial sectors, but imported inflation and consumer sentiment are hurting domestic demand. The carry trade is the key activity that is weakening the Yen even further, and it will be difficult to get that trade to unwind. Sustainable Japanese inflation is needed.

April was disappointing for Wall Street, so investors are working to bounce back in May, although they are facing some challenges in the current market conditions.

iShares Currency Hedged MSCI Japan ETF has outperformed the S&P 500 index in the past two years. Japan's economy is expected to remain robust in 2024, with a resilient services sector. The Bank of Japan is unlikely to reverse its dovish monetary policy, providing good buying opportunities for HEWJ.

iShares Currency Hedged MSCI Japan ETF is a currency-hedged exchange-traded fund that tracks the performance of large and mid-sized Japanese companies, reducing exposure to currency fluctuations. The fund offers broad exposure to Japanese companies and customizable currency risk management. The expense ratio of HEWJ is 0.50%, and BlackRock has waived a portion of its management fees to attract investors.

Japanese stocks have outperformed this year. The sustainability of this run will be tested, though, by the BoJ's move toward normalizing monetary policy. Having already re-rated, the HEWJ fund is at risk of a reset lower.