Our International Technical Leaders Indices were evaluated at the end of March, leading to some shifts in allocation to start the second quarter.
International equities had a banner year in 2025 and have shown sustained strength so far in 2026. The broader asset class moved into the top-ranked position in our DALI asset class rankings in February, saw some volatility in March, but ultimately ended the first quarter ranked ahead of the other broad asset classes. 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, which was the same as the previous evaluation. There are 21 countries represented, including 12 that saw an allocation shift. Both of those are lower than last quarter, so we saw more rotation in the names within countries than the rotation in regional strength. Japan is now the most overweight country at 17.3%, adding 13.8% in new allocation. South Korea saw the second highest new allocation added at 11.6% bringing its total allocation north of 10%.
On the sector side, finance remains at the top holding at 30.2%. Producer manufacturing and electronic technology saw the most new allocation added at 15.9% and 6.5%, respectively. This brings each of those industry groups to double-digit allocations within the portfolio.
Emerging Markets
The Invesco Dorsey Wright Emerging Markets Momentum ETF (PIE) saw slightly fewer allocation shifts than PIZ at the end of last month, with 38 names swapped out for new positions. This was also a much smaller allocation shift in PIE than we saw at the end of Q3. There are 12 countries represented in the holdings, seven of which saw changes. Taiwan saw the greatest number of new names added, picking up 15.7% in new allocations to bring its total weight to 57.2%, making it the largest country weight in the portfolio. China saw 13.4% of new allocation, but its total allocation increased marginally from 16.7% to 16.8%. This was a notable decline from the 33.7% in total China allocation six months ago. These two countries alone still make up over two-thirds of the fund’s total allocation.
From a sector standpoint, electronic technology saw a notable pick-up in new allocation, with 13.3% of new allocation to bring the total allocation to over 39%. Health technology and energy minerals saw the next largest amount of new allocation added at 5.1% and 4.4%.
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 are positive signs 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 in recent months leaves them well positioned for the second quarter.
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.
Click here for more information from Invesco on the Invesco Dorsey Wright Developed Markets Momentum ETF (PIZ): https://www.invesco.com/us/en/financial-products/etfs/invesco-dorsey-wright-developed-markets-momentum-etf.html
Click here for more information from Invesco on the Invesco Dorsey Wright Emerging Markets Momentum ETF (PIE): https://www.invesco.com/us/en/financial-products/etfs/invesco-dorsey-wright-emerging-markets-momentum-etf.html
Dorsey, Wright & Associates, LLC is owned by Nasdaq, Inc. and we have affiliates who also provide financial services, research, information, and act as Brokers/Dealers to a wide variety of clients. Our affiliates use the information we create to create indexes, which are then used to create Exchange Traded Funds. These things create a potential conflict of interest in that we may have an incentive to promote or use the products and services of our affiliates and business partners. A number of Dorsey Wright representatives are registered with and hold securities licenses with the affiliate broker-dealers. In this capacity, they assist with the marketing and distribution of Exchange Traded Products.
