Core Viewpoint - The rise in global conflict and defense spending presents potential benefits for emerging markets equities, particularly in the defense sector [1] Group 1: Global Conflict and Defense Spending - Global conflict has increased in 2026, with notable events such as Russia's invasion of Ukraine and U.S. military actions in Venezuela and Iran contributing to market volatility [1] - Defense spending is on the rise as nations prepare for a multipolar world, which may initially concern investors regarding emerging markets equities [1] Group 2: Emerging Markets and Defense Sector - Emerging markets companies are increasingly significant in global military spending, with China and South Korea ranking fourth and tenth respectively in arms exports from 2020 to 2024, and Turkey ranking eleventh [1] - U.S. pressure for NATO defense spending, enhanced budgetary capabilities of smaller economies, and rising geopolitical tensions are driving military industry spending [1] Group 3: Investment Opportunities - Emerging markets defense firms have demonstrated specialization and efficiency in fulfilling orders, supported by government backing [1] - The Avantis Emerging Markets Equity ETF (AVEM) is highlighted as a viable investment option, having attracted significant inflows and achieving a 45.4% return over the past year [1]

Group 1 - The article discusses the attractiveness of international equities in the context of a weak dollar, highlighting the limited options available in the closed-end fund segment compared to ETFs [1] - The Voya Emerging Markets High Dividend Equity Fund is mentioned as a notable closed-end fund that could be of interest to investors [1] - Binary Tree Analytics (BTA) is introduced as a firm with a focus on providing transparency and analytics in capital markets, particularly in closed-end funds, ETFs, and special situations, aiming for high annualized returns with low volatility [1]

Market Performance & Outlook - Equity markets experienced a strong year, with the market up 16% [1] - The market has increased by 80% over the last three years [3] - S&P and Russell 2000 constantly hit new highs [2] - International and emerging market equities are up over 30% year-to-date [2] Portfolio Strategy & Recommendations - Rebalancing portfolios is recommended to address overexposure to benefiting indices [4] - Repositioning portfolios to reduce risk is suggested [4] - Overweighting small caps is favored [5] - International developed and emerging market equities are attractive [5] Small Cap & M&A Activity - The IPO calendar in 2025 doubled that of 2024, and is expected to be even stronger in 2026 [5] - M&A activity has increased, with small cap stocks often being targets [5] International Market Considerations - A significant portion of the 30+% return in international and emerging markets is due to the weakening US dollar [6] - In Europe, the return in US dollar terms is over 30%, while in local currency, it's about half of that [6]

Core Insights - U.S. equities have performed well in 2023, prompting investors to shift from underweight to neutral or overweight positions in foreign equities, particularly emerging markets [1][2] - The decline of the dollar and specific market events have contributed to the strong performance of foreign equities compared to U.S. investments [1] - Emerging markets are seen as having more growth potential due to being ahead in their rate cycles, making them attractive for investment [2] Emerging Markets Equities - Taiwan Semiconductor Manufacturing Co. (TSM) has returned 46.4% year-to-date (YTD) and is a significant holding in the Fidelity Emerging Markets Multifactor ETF (FDEM) [3] - Tencent Holdings (TCEHY) has achieved a YTD return of 48.1%, with a diverse portfolio that includes video games, social media, and e-commerce [4] - Alibaba Group (BABA) has returned 86.1% YTD, despite uncertainties surrounding Chinese stocks, benefiting from a shift away from U.S. equities [5] Fidelity Emerging Markets Multifactor ETF (FDEM) - FDEM has returned 25.4% YTD as of November 6, charging 27 basis points [6] - The ETF employs a multifactor approach, investing in stocks with attractive valuations, positive momentum, and high-quality profiles, while tilting towards sectors less correlated to U.S. stocks [6] - The ETF includes investments in firms like SK Hynix, indicating a strategy focused on outperforming companies in emerging markets [6]