European equities and related exchange traded funds could outperform in 2015, capitalizing on lower energy prices, an improved export outlook and potentially more European Central Bank easing.
Alternatively, investors seeking to capture Eurzone market exposure can also consider a hedged-equity ETF that will help diminish the negative effects of a depreciating euro currency. For example, the Deutsche X-Trackers MSCI Europe Hedged Equity ETF (NYSEArca: DBEU), iShares Currency Hedged MSCI EMU ETF (NYSEArca: HEZU) and WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) hedge against the euro currency and would outperform a non-hedged Europe equity ETF if the euro currency continues to depreciate.
DBEU, though, takes a slightly broader approach to the European markets, including about a 40% combined tilt toward the United Kingdom and Switzerland. HEZU and HEDJ only cover Eurozone member states.
“Europe was a market ‘darling’ this time last year, then became a pariah,” economists at Morgan Stanley said in a research note. “[Now] we like European equities, (especially cyclicals) and European ABS.”
Mislav Matejka, chief European equity strategist at J.P. Morgan, even predicts that Eurozone stocks could outperform U.S. equities next year.
Specifically, the investment banks are pointing to three factors that will support the region: the ECB, a cheap euro currency and low oil prices.