The curtain has risen and fallen on America's latest piece of political theater, and the last minute debt-ceiling deal pushed the next one to early February.
Although economists will probably argue for years about the "real cost" of the federal shutdown in terms of lost wages or productivity, the drama has already impacted America's credit rating.
Fitch has placed the United States' AAA credit rating on a watch list, specifically citing repeated congressional failure to put its house in order. The Chinese credit rating agency DaGong downgraded it for similar reasons.
Standard & Poor's, likewise, has had a AA+ rating on the United States since 2011.
Washington's blustery incompetence does not seem to have bothered markets to any great degree, at least not this time. The Standard & Poor's 500 Index and the Dow Jones Industrial Average have climbed 8% and 5% since late August when the debt ceiling and possible shutdown re-entered the news cycle. Although both did briefly turn negative when the shutdown began, they recovered quickly.
There's no guaranteeing, however, that the next crisis in February won't scare away the bulls.
Investors tired of the political uncertainty have available options if they want to invest in a more fiscally responsible climate today.
Investing in Fiscal Prudence
The rating agencies evaluate a few factors in determining the rating of a sovereign issuer, and all have their own methods.
In general, they look at a variety of qualitative considerations, like institutional stability of the government and its flexibility to respond to crises. That is, the agencies evaluate how likely a government is to collapse altogether and how well a government can put together effective policy solutions to crises.
They also tend to employ quantitative metrics in different ways. Fitch, for example, maintains that a government debt-to-gross domestic product (GDP) ratio between 80% and 90% is the upper limit for a AAA rating. Standard & Poor's, however, looks more at the trend of that number and assigns a score based on which way it's heading, and to what degree.
Only eight countries in the world have AAA credit ratings from the four major credit ratings agencies: Canada, Denmark, Finland, Norway, Sweden, the Netherlands, Switzerland, and Germany. (That number falls to two - Finland and Norway - if you include Dagong and JCR, the Japanese rating agency).
In general, the eight countries in question have high per-capita GDP, downward trends in their debt-to-GDP ratio, and governments that have been able to maintain consistent, prudent policy making.
And you can invest in them.
Each one of the countries named has an ETF that provides a reasonable approximation of their national capital markets.
Investing in AAA Ratings
Of the ETFs focused on eight AAA countries, four have shown significant increases in value against the iShares Core S&P ETF (NYSEARCA: IVV) - which tracks the S&P 500's performance - since "shutdown" and "default" re-entered the news in September.
The four countries these funds attempt to emulate have governments that have tended to take a mature approach to their budgets and national finances. They have also seen their value increase over the last few months, while the U.S. Congress dithered over its budget responsibilities.
- iShares MSCI Finland Capped ETF (BATS: EFNL) leads the pack, showing a 8.5% price gain over IVV since the beginning of September. The largest asset class is Industrials, followed by Information Technology. Largest single holdings include Nokia and insurance conglomerate Sampo Group.
- iShares MSCI Germany Index Fund ETF (NYSE: EWG) comes in second with a 7% gain over IVV. Consumer Discretionary is the largest sector, followed closely by Financials and Industrials. Bayer, Siemens, and BASF are the top three individual holdings.
- iShares MSCI Denmark Capped ETF (BATS: EDEN) barely trails Germany at 5.5% gain over IVV. Novo Nordisk and Danske Bank account for 20.9% and 7.67% of the portfolio, respectively.
- iShares MSCI Switzerland Capped ETF (NYSEARCA: EWL) is the last in our group, showing 3.07% gain over IVV. Healthcare, Financials, and Consumer Staples form the largest sector holdings for this fund. Nestle, Roche, and Novartis are the top three individual holdings.
Investors should note that the AAA rating is no guarantee of strong equity returns: ETFs for Canada, Norway, Sweden, and the Netherlands did about as well as - or worse than - the S&P 500 Index. And the S&P itself continued to increase in value during Congress's melodrama.
For more on profitable overseas opportunities: 3 Overseas Choices for Yield-Starved Investors