Europe’s P/E Ratios Can Keep Recovering

The potential for sustained Eurozone economic recovery along with higher equity prices underscores the importance of proper evaluation of Europe ETFs.

VGK’s performance has been impressive and its 0.12% expense ratio is lower than 93% of comparable ETFs, according to Vanguard. However, VGK allocates a combined 47.2% of its weight to the U.K. and Switzerland, meaning the ETF is not as intimately correlated to a Eurozone recovery as some investors may think.

While Switzerland and U.K. ETFs have been stout performers this year, investors may want to consider ratcheting up their Eurozone exposure via ETFs such as FEZ and HEDJ, which feature higher leveraged to the Eurozone trade.

DBEU, which debuted last month, hedges currency exposure to the euro, British pound, Swiss franc and select Nordic currencies, has gained 4.1% since it came to market.

Europe Forward P/E Ratios

Chart courtesy: Yardeni Research