Our International Technical Leaders Indices were evaluated at the end of July, leading to some shifts in allocation to start the second half.
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International equities took a step back in the third quarter of 2026 after experiencing sharp appreciation in prior months. Even with some consolidation, the broader asset class still sits in the top-ranked position in our DALI asset class rankings, signifying the long-term strength remains intact. Underneath the hood, there was some sharp appreciation from focused areas showing more momentum than their peers.
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 and emerging markets then focusing exposure only 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 is significantly fewer than the 59 seen in Q2. There are 24 countries represented, including 15 that saw new allocation added. Canada remains the most overweight country at 13.9%, which is about 5% less allocation than we saw at the end of Q2. Japan has the second highest weighting in the fund and saw the largest percentage of new allocation.
On the sector side, finance remains the top holding and expanded its allocation to over 60%, nearly doubling its total allocation over the past six months. Non-energy minerals is the only other industry with double-digit allocation at 10%, adding 7% in new allocation in the most recent evaluation.
Emerging Markets
The Invesco Dorsey Wright Emerging Markets Momentum ETF (PIE) saw more allocation shifts than PIZ at the end of last month, with 50 names swapped out for new positions. That is also substantially more than the 39 changes seen at the end of June. There are 12 countries represented in the holdings, 11 of which saw changes. Taiwan continues to demonstrate strength with the greatest number of new names added at 23% in new allocation out of the total weight of 61%. China saw 3.6% of new allocation, but its total allocation decreased by 4% to 10%. This was a notable decline from the 33.7% in total China allocation 12 months ago. These two countries alone still make up nearly three-quarters of the total allocation.
From a sector standpoint, there are 15 industry groups represented, nine of which saw changes. Electronic technology is 38% of the fund and saw 14% in new allocation. Finance saw 11% in new allocation added and now sits at over 27% in allocation. There were minimal changes across the rest of the industry groups.
Altogether, these changes reflect a continuation of the relative strength trend that has produced improvement for international equities in recent quarters. The momentum factor saw some turbulence in international equities in Q3 as major winners consolidated. This is normal in any long-term bullish trend for any asset class. If we see more change over the next three months, the process behind these strategies will adapt to new leadership trends, pushing the portfolios toward strength and avoiding areas of weakness.
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.
