Unemployment and high inflation have been the main hindrances to growth in most of the developed and developing economies. While the job market has improved substantially in U.S. and Japan, unemployment has been drifting higher for the Euro zone and most of the emerging economies.

According the recent study from International Labor Organization (ILO). global unemployment would rise over the next five years from 201 million in 2014 to at least 212 million by 2019 due to increasing joblessness and widening income inequalities. The agency projects that the richest 10% of the world will earn 3040% of total income while the poorest 10% will earn as little as 2%, suggesting that rich will get richer and poor will get poorer.

Deflation has soured every corner of the world after the recent collapse in the oil price. The Euro zone already entangled itself in deflation at the end of last year and many other nations fear being trapped in the same web. In order to fight against deflation and stimulate growth, countries across the globe chose monetary easing policies to save their economies from sagging (read: 3 ETFs to Fight Against Global Currency War ).

Given this, many investors may want to shift their investment portfolio to countries, which have lower unemployment and inflation. For those, a look to the Misery Index could be helpful. This benchmark was developed by Arthur Okun and measures the current condition of the economy by adding unemployment rate and inflation. The main thought behind the index is that rising unemployment and high inflation have a negative impact on the economy. Thus, a lower number means strengthening economy and vice versa.

The Misery Index reached a 56-year low. suggesting that most of the economy is happy and content. As per the index, Thailand, Switzerland, Japan, South Korea and Taiwan topped the list with score under 5, suggesting that they could enjoy higher employment and low inflation this year. Denmark, China, U.S. Norway and Britain round off the top 10 happiest countries of 2015.

While there are several ETF options available in the space to play these countries with lower risk and higher diversification benefits, we have highlighted funds that have the potential to outperform over the next one-year period. These products have a top Zacks ETF Rank of 2 or Buy rating with a Medium risk outlook.

The prospect of the job market has improved substantially in Japan over the past several months as the availability of jobs rose to the highest level in more than two decades in December. Though unemployment in January rose marginally to 3.6% from 3.4% in December, job offers to applicant ratio remains robust at 1.14, the highest level since April 1992. Meanwhile, annual inflation fell to the 10-month low of 2.2% from 2.5% in December due to a sharp fall in oil prices. This trend is likely to continue this year given Japans massive monetary easing policies announced last year (read: Japans Monetary Easing Puts These Country ETFs in Focus ).

The ultra-popular fund targeting the Japanese economy is EWJ with a total asset base of over $15.4 billion. It tracks the MSCI Japan Index and holds 313 stocks in its basket. Though it is slightly skewed toward the top firm Toyota Motor at 6.547%, other firms do not account for more than 2.80% of assets. The product is widely spread out across consumer discretionary, industrials, financials and information technology that make up for double-digit exposure each in the basket.

It trades in heavy volume of 32.6 million shares per day and charges 49 bps in annual fees. The fund has gained about 9.5% so far in the year.

iShares MSCI South Korea Capped ETF (EWY )

Unemployment rate in South Korea stands at 3.4% in January 2015, down from 3.5% in December while inflation declined to the lowest level in more than 15 years to 0.5% in February versus 0.8% in January. Falling unemployment and tumbling inflation point to a strong economy. As per International Monetary Fund (IMF), Asias fourth-largest economy would grow 3.7% this year versus 3.3% last year (see: all Developed Asia-Pacific ETFs here ).

In order to tap the growing economy, investors could focus on EWY, which is the most popular and liquid option to track the countrys equity world. The ETF follows the MSCI Korea 25/50 index, holding 110 stocks in its basket. Samsung dominates the funds return at nearly 22% while other firms hold less than 4.2% of assets. From a sector look, information technology accounts for more than one/third share while consumer discretionary, financials and industrials round off the next three with double-digit allocation each.

The fund has amassed $4 billion in AUM and trades in average daily volume of 2.7 million shares. It charges 62 bps in annual fees and has added 2.7% in the year-to-date timeframe.

iShares MSCI Taiwan ETF (EWT )

In Taiwan, the unemployment rate has been on a declining trend reaching an annual adjusted 3.78% in January, the lowest level in 14 years. On the other hand, the nation recorded deflation for two consecutive months this year. The Consumer Price Index dipped 0.19% year over year in February, after falling 0.94% in January. Despite this, the government of Taiwan foresees no deflation risk and inflation of around 0.26% for the year.

Further, it raised the countrys growth outlook to 3.78% from the previous expectation of 3.50% and 3.74% recorded in 2014 (read: 3 Country ETFs to Benefit from Falling Commodity Prices ).

The most popular and liquid option tracking this nation is EWT having AUM of $3.7 billion and average daily volume of around 7.6 million shares. It tracks the MSCI Taiwan Index and charges 62 bps in fees per year. Holding 104 stocks in its basket, the fund is highly concentrated on the top firm Taiwan Semiconductor at 23.4% while other firms hold less than 7% share. Sector-wise, about three-fifth of the portfolio is dominated by information technology, followed by financials (16.9%). The ETF is up over 4% in the year-to-date timeframe.

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