MSCI EAFE Index
An index that provides access to developed markets outside the United States
MSCI EAFE is a widely recognized international equities index consisting of large companies across developed countries in Europe, Australasia and the Far East, excluding the U.S. and Canada. MSCI EAFE includes equities across a range of industries and regions, providing broad opportunities for growth.
An international approach
Equities from the United Kingdom, Japan, France and Germany account for more than 60% of the Index. Individual companies represented include Nestle, Toyota Motor Corp and Bayer — companies with a strong historical track record of positive returns. MSCI EAFE includes ten market sectors including financials, health care and energy.
The international market growth opportunity
The United States represents only 54.5% of the total global stock market.2 The remaining 45.5% of the world’s equities are traded on markets in Paris, London, Berlin, Singapore and beyond. In an increasingly global economy, international markets may provide substantial growth opportunities. In fact, the World Bank forecasts world economic growth to exceed the growth in the United States in each of the next three years.3
A wide-reaching international equities index
MSCI EAFE is the oldest international equities index and includes a selection of stocks from 21 countries. MSCI EAFE tracks stocks from these developed markets, providing the opportunity to participate in returns from international companies while limiting exposure to emerging markets.4 The index is reviewed quarterly to reflect changes in the international equities market.5
MSCI EAFE developed markets countries7
Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, United Kingdom
For more information about MSCI EAFE, please visit www.msci.com/eafe
Table assumptions: Index growth from 12/31/2009 – 12/31/2020. Calendar year-end returns are the percentage change between the closing price on December 31 of the year noted and December 31 of the prior year. Past performance is not an indicator or guarantee of future performance.
Last 10 years of MSCI EAFE Index performance
MSCI EAFE provides an international equities opportunity with over 30 years of live history. Domestic indices such as the S&P 500® Index exclude international equities markets and a majority of the world’s equities. The graph below illustrates how MSCI EAFE and the S&P 500® Price Index have performed over the last 10 years.
With the international economy projected to outperform the United States over the next several years, MSCI EAFE may capture a portion of that growth and could provide an opportunity to harness that potential.
1 Source: MSCI. MSCI EAFE is one of MSCI’s oldest indexes, dating back to 1969. MSCI EAFE’s long history makes it one of the most benchmarked indexes of international equities.
2 Chart Source: World Bank, Global Economic Prospects, January 2021.
3 Source: World Bank, Global Economic Prospects, January 2021. MSCI EAFE is designed to represent the performance of large and mid-cap securities across 21 developed markets excluding the U.S. and Canada. A portion of the world GDP could include emerging markets, which are countries in the process of rapid development with less mature markets and regulations, as well as the developed markets tracked by MSCI EAFE.
4 Limiting exposure to emerging markets may reduce potential volatility but may also reduce potential short-term returns of emerging markets countries experiencing rapid growth.
5 The index i s reviewed quarterly—in February, May, August and November—with the objective of reflecting change i n the underlying equity markets in a timely manner, while limiting undue index turnover. During the May and November semi-annual index reviews, the index is rebalanced and the large and mid capitalization cutoff points are recalculated.
6 Source: MSCI Indexes.
7 As of January 2021. Developed markets are advanced economies with strong institutions and high levels of per capita income.
This material is not a recommendation to buy, sell, hold, or rollover any asset, adopt a financial strategy or use a particular account type. It does not take into account the specific investment objectives, tax and financial condition or particular needs of any specific person. Clients should work with their financial professional to discuss their specific situation.
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