International momentum has been on a tear in 2025. Today we cover key metrics to watch and detail where the group fits within your portfolio as we close May
Internationals have been all the rage so far in 2025. As clients undoubtedly call in and ask you about how they are positioned to take advantage of their recent strength, there are pitfalls we need to be wary of that aren’t present in your run of the mill Dow stock. From geopolitical unrest, continuously evolving global tariff concerns, and currency relationships driving headlines every second of the day, remaining diligent in the face of market noise is mission critical on the global stage. Luckily, we can still use price action to guide our investment hand across the globe, utilizing outstanding trends to capture areas of relative strength. Said plainly, utilizing momentum can potentially help us find opportunities within our portfolio internationally.
Our first step in doing so will be looking at a “Relative Strength Spread” which calculates the dispersion between a basket of relative strength (RS) winners and losers. A wider spread can potentially lead to a wider performance dispersion, which may be beneficial for trend followers. The image below tracks said spread across the globe. While domestic spreads have rebounded quite nicely off of 2025 lows in early April, the real showstopper has been on the developed markets spread, which has marched higher (meaning a bigger spread between winners and losers) throughout the year. In layman’s terms, a wider spread can act as a tailwind for momentum based strategies.
This wide spread has translated nicely into performance so far in 2025. Broad international representative ACWX is up roughly 14% this year, its third best start to a year through 5/18 since 1988 (including index data prior to fund inception.) Building on the strength of momentum on the developed international front, we can compare the performance for ACWX to that of the Invesco Nasdaq Dorsey Wright Developed Markets Momentum ETF PIZ, up nearly 20% so far in 2025. Breaking a spread triple top to close April, the fund has rallied up to new all-time highs with May’s action. While a ways away from traditional support on its default chart, the upside action has certainly been encouraging so far this year. PIZ also sits on a long-term RS buy signal against domestic benchmark SPXEWI, and has shown nice relative improvement against developed proxy EFA. Point being, international momentum (particularly on the developed front) has been strong, leading to productive showings for PIZ against other representatives on the global stage.
Diving deeper into the security selection methodology behind PIZ, the fund selects a basket of roughly 100 “technical leaders” from a universe of stocks traded in developed markets around the globe. Evaluated on a quarterly basis, the fund will continuously gravitate to the highest relative strength options from said basket, tactically pinpointing names which have demonstrated the ability to best their peers. As of the last evaluation period at the end of Q1, PIZ was heavily weighted towards European representatives (and still is today.) The group accounted for nearly 60% of total allocation, with notable standouts from Germany, Switzerland & the United Kingdom. Underneath the hood of NDW’s DALI rankings, European representatives (both emerging and developed) have claimed the top two spots within the international rankings for over a year now, speaking to the consistency of broader leadership from the space. Japan & Canada are highlights outside of Europe, accounting for roughly 21% of total fund allocation at the end of Q1. From a sector perspective, PIZ is heavily weighted towards Financials & Industrials, also points of strength on the domestic front.
All this to say, the “momentum” of momentum on the developed markets front is quite strong as we move into June. While there are many forces in play on the world’s stage, utilizing price action alone is paramount to cut through the noise of trade, tariffs, and a weakening greenback. While trends can always shift, remaining tactical on the international front can certainly provide nice ammo for conversations as you enter into mid-year check-ups with clients on their portfolio’s performance so far in 2025.
Disclosures:
This article is intended for Financial Professional Use Only.
Management and other expenses can have a material impact on performance when compounded over time. Past performance, hypothetical or actual, does not guarantee future results. In all securities trading there is a potential for loss as well as profit. It should not be assumed that recommendations made in the future will be profitable or will equal the performance as shown.
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Invesco Nasdaq Dorsey Wright Developed Markets Momentum ETF (PIZ): https://www.invesco.com/us/financial-products/etfs/product-detail?audienceType=Investor&ticker=PIZ
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