Our International Technical Leaders Indices were evaluated at the end of December, leading to some shifts in allocation to open the new year.
International equities had a banner year in 2025. The broader asset class ended last year second out of the six major asset classes in our DALI rankings, but saw continued near-term momentum since the end of April. Underneath the hood, sharp improvements from some focused areas have contributed to that recent strength.
Capitalizing on strength in international equities can be difficult. Different countries have different economic drivers to consider. There are also a multitude of different factors that can affect the price action of individual securities within each country. This often leads to increased dispersion between leaders and laggards in foreign markets, producing big winners but also big losers. Using a momentum-focused approach can be beneficial here, allowing a defined process to determine the strongest securities while avoiding the weakest ones.
Our international Technical Leaders indices seek to do just that, taking broader inventories from developed markets and emerging markets then only focusing exposure on the 100 names from each list that have demonstrated the strongest momentum. This includes the indices behind the Invesco Dorsey Wright Emerging Markets Momentum ETF (PIE) and the Invesco Dorsey Wright Developed Markets Momentum ETF (PIZ). Both indices were reconstructed at the end of the most recent quarter, leading to some allocation shifts to better align each strategy with areas of improvement.
Developed Markets
The Invesco DWA Developed Markets Momentum ETF (PIZ) saw 42 changes in the most recent evaluation. This was more than the previous number of changes in the third quarter (28). There are 23 countries represented, including 16 that saw an allocation shift. Canada is now the most overweight country at 17.3%, adding 4.1% in new allocation. The United Kingdom saw the second highest new allocation added at 3.4% bringing its total allocation north of 10%.
On the sector side, finance remains the top holding at 42.3% and saw the largest allocation adjustment this quarter at over 11%. Non-energy minerals also saw a significant allocation increase, adding over 5% to bring its total allocation to 11%.
Emerging Markets
The Invesco Dorsey Wright Emerging Markets Momentum ETF (PIE) saw more allocation shifts than PIZ at the end of last month, as 50 names were swapped out for new positions. This was also higher than the allocation shift in PIE at the end of Q3, but not to the same magnitude as we saw in developed markets. There are 12 countries represented in the holdings, eight of which saw changes. Taiwan saw the greatest number of new names added, picking up 18.8% in new allocations to bring its total weight to 43.8%, making it the largest country weight in the portfolio. China saw the second greatest number of names added, representing 11% in new allocation, but its total allocation fell to 16.7%. This was a notable decline from the 33.7% in total China allocation last quarter. These two countries alone still make up over half of the fund’s total allocation.
From a sector standpoint, finance saw the largest increase in allocation, picking up 9.6% to now make up over 29% of the portfolio. Electronic technology continued to see a notable pick-up in new allocation, moving to 23.9%, but lost about a percent in total allocation. Energy minerals saw a spike in new names, adding 6.7%.
Altogether, these changes reflect a continuation of the relative strength trend that has produced improvement for international equities in recent quarters. Both PIE and PIZ are seeing wider sector and regional participation, which is a positive sign for the momentum-based strategies these indices represent. Markets will likely change somewhat over the next three months, and the process behind these strategies will push them toward the strongest areas at the next quarterly evaluation. However, the consistent leadership displayed from the broader international space throughout 2025 leaves them well positioned heading into the new year.
