The “Sell America” Trade, Part 2: Top International ETFs to Watch For 2026

Xtrackers MSCI EAFE Hedged Equity ETF

DBEF

+0.04%

DBEF is my preferred way to gain exposure to developed international equities in the EAFE region. Its 0.35% expense ratio is comparable to EFA, which charges 0.32%, but DBEF includes one feature I value: currency hedging.

In my opinion, if you are investing in international stocks, the goal is to earn returns from share price appreciation, reinvested distributions, and buyback activity. Currency movements, therefore, add a separate source of risk and return that can distort those results.

With an unhedged ETF like EFA, changes in the U.S. dollar versus foreign currencies directly affect performance. When the U.S. dollar strengthens, foreign equity gains translate into fewer U.S. dollars, dragging on returns. When the dollar weakens, unhedged ETFs benefit from the opposite effect.

That currency exposure can work for or against you, but historically it has often worked against U.S. investors due to persistent dollar strength. While a sell U.S. theme could imply dollar weakness, this is not about making a directional call on the currency. It is about removing that variable altogether.

DBEF does that by hedging out currency fluctuations while holding the same underlying basket of stocks as EFA. The ETF currently offers a 2.26% 30-day SEC yield and has $8.44 billion in assets under management, making it a well-established vehicle for hedged developed-market exposure.

WisdomTree Europe Defense Fund

WDEF

-2.35%

One of the standout industries over the past several years has been defense. We are now roughly 1,420 days into the Russia–Ukraine war, the conflict between Israel and Palestine continues, and civil unrest in Iran against the Khamenei regime remains unresolved, with the possibility of U.S. involvement.

President Trump’s renewed emphasis on defense has pushed U.S. military-industrial stocks to record highs. At the same time, European defense companies have also seen meaningful gains.

Europe is facing a shifting security backdrop.  A more isolationist and nationalistic United States is forcing European governments to rethink defense spending and long-term military readiness, particularly as a deterrent against Russia.

Added to that is the rhetoric around Greenland. Trump has not ruled out the use of force, stating he would pursue control through a deal or annexation. While remote, the idea of a serious rupture within NATO is now being openly discussed, which would fundamentally change Europe’s defense posture.

That is the context in which WDEF stands out. The ETF tracks the WisdomTree Europe Defense Index, which tracks companies domiciled and listed in developed European markets that generate at least 10% of revenue from defense-related activities. That definition extends beyond weapons manufacturing to areas such as military electronics, propulsion systems, space, and cyber defense.

A distinguishing feature of the methodology is its use of an exposure score. Each company receives a score from 1 to 3 based on how much revenue comes from defense. At each semi-annual rebalance in March and September, holdings are weighted by free-float market cap multiplied by this exposure score, with caps applied to prevent excessive concentration.

Constituents must also meet minimum size and liquidity thresholds, including a free-float market capitalization of at least $300 million and average daily trading volume of $2 million. Current top holdings include Thales, BAE Systems, Rheinmetall, Saab, and Leonardo.

If the United States pulls back from its role as global security backstop, or becomes a less reliable ally, European rearmament could shift from a long-term goal to an urgent priority. In that environment, WDEF remains firmly on my watch list.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.