Under the Spotlight AUS: Betashares Diversified All Growth ETF (DHHF)

Global stocks have rallied since President Donald Trump eased up on his trade war on everyone.

The strong rally from April’s lows got an extra boost this week when U.S. Treasury Secretary Scott Bessent said he would meet with Chinese officials in Switzerland to discuss trade. This tentative thawing of relations follows Trump’s comments that he will lower tariffs on China ‘at some point.’ The prospect of a trade resolution has allowed Wall Street to recover its footing, along with markets across Europe and Asia. The Betashares Diversified All Growth ETF ($DHHF) has rallied 9% from its April lows as it rides the rebound in U.S., Australian, European and Asian stocks. 

DHHF has been a popular ETF on the Stake platform this year. Around three-quarters of its portfolio is in U.S. and Australian stocks, while the rest is invested across developed and emerging markets. It offers a more diversified portfolio of shares than some of the other ETFs we’ve looked at this year, and which are also popular on Stake: the Vanguard Australian Shares Index ETF ($VAS), iShares S&P 500 Index ETF ($IVV) and Betashares Nasdaq 100 ETF ($NDQ). 

Betashares says $DHHF may suit investors with a timeframe of five years and a high tolerance for risk. It charges an annual management fee of 0.19%. The ETF is composed of other ETFs, including Betashares and non-Betashares products. It pays a quarterly distribution, though a distribution reinvestment plan applies automatically unless investors opt out. 

Wall streak

$DHHF has around 40% of its portfolio invested in U.S. stocks, which lately has been a benefit. The S&P 500 Index is up 13% from its April lows and strung together a nine-day winning streak – the longest since 2004. Big tech has led the way: the Mag 7 stocks have climbed 17%. Nvidia ($NVDA) is up 24%, while Tesla ($TSLA) – equally popular with Stake customers – has motored 28% higher after CEO Elon Musk said he would spend more time at the helm of the car maker. 

While the rally is certainly linked to the easing of trade tensions, earnings reports have played a role in supporting U.S. stocks. Q1 blended earnings growth (which combines actual results for S&P 500 companies that have reported and estimated results for companies that have yet to report) was 12.8% year-on-year (YoY) at the end of last week, according to FactSet. If 12.8% is the actual figure for the quarter, it will be the second consecutive quarter of double-digit earnings growth. It will also be the seventh consecutive quarter of YoY growth. 

The big question is whether earnings momentum can be maintained, given concerns about the fallout from Trump’s tariffs. In April, analysts lowered EPS estimates for Q2 by more than usual for the first month of a quarter. The percentage of companies issuing negative EPS guidance was 57% at the end of last week, according to FactSet. This is equal to the five-year average of 57%, but below the ten-year average of 62%. Analysts forecast Q2 earnings growth of 5.7% YoY and revenue growth of 4% YoY. The forward 12-month P/E ratio for the S&P 500 is 20.2x, which is above the five-year average of 19.9x.

C’mon Aussie

Trump’s trade tactics have prompted some global investors to reallocate funds outside of the U.S. A recent Bank of America fund manager survey showed 69% of portfolio managers believe the age of U.S. exceptionalism is over. Around 35% of DHHF is invested in Australian stocks. 

Australian stocks have benefitted from these global capital flows, especially big blue chip names that feature prominently in Asia Pacific stocks indices tracked by fund managers. Many of these names are also consistent dividend payers. 

The S&P/ASX 200 Index is up 11% from its April lows and is trading at around 17x forward earnings. Commonwealth Bank ($CBA), which we covered in February, is up 14% from its April low and hit a record high on 2 May. Wesfarmers ($WES) – which owns Bunnings, Kmart, Target and Officeworks – hit a record high earlier this month, as did its spun-off supermarket operator Coles Group ($COL).  

Additionally, Aussie firms will appreciate the policy continuity following the victory of the Australian Labor Party in last week’s election. The Reserve Bank of Australia is also expected to continue cutting interest rates, which could further heat up the local market. 

But right now the focus for investors is earnings reports. This week’s bank results from Westpac ($WBC), National Australia Bank ($NAB) and ANZ ($ANZ) highlighted the ongoing margin pressure on some of the ASX’s largest stocks. Large miners like BHP ($BHP) and Rio Tinto ($RIO) continue to be pressured by weakness in iron ore prices. With seven weeks until the end of the financial year, investors need to be on alert for ‘confession season’, a time when companies confess that earnings may fall short of expectations. 

Intercontinental express

DHHF also offers exposure to Asian and European stocks, both of which have joined in the global rally. The MSCI Europe Index has broken through its 2007 high as global capital flows into the region. U.S. investors allocated $US10.6b into European ETFs in Q1, according to BlackRock. Some of the big winners in Europe have been defence stocks: Germany’s Rheinmetall is up 181% this year. 

Asian stocks have also gained ground. Japan’s Nikkei is up 18% from its April lows. China’s CSI 300 Index is up only 7% from its April low, though the index rallied 35% from 13 September to 8 October last year, as the government moved to provide support to the world’s second largest economy. Electric vehicle maker BYD ($BYDDY) has enjoyed a 50% gain in its U.S.-listed shares this year as it’s been selling more cars than Tesla ($TSLA).

Profits without borders

The Betashares Diversified All Growth ETF offers access to a diversified portfolio of global stocks at a low cost. 

The spread of assets provides exposure to the U.S. and its innovative tech sector, but also offers a buffer through exposure to Aussie, European and Asian stocks. Trump wants to Make America Great Again, but for now it seems like he’s made global stocks great again.