With Greece paying back creditors and volatility dissipating, investors may want to revisit the international investment theme through Eurozone-related exchange traded funds.
Goldman Sachs (NYSE: GS) has now upgraded its three-month view on European equities to “overweight” and downgraded U.S. stocks to “underweight,” arguing that stocks at home typically underperformed in the 12 months after a Federal Reserve’s first rate hike, reports Ansuya Harjani for CNBC.
“European equities have been one of the key asset classes to benefit from a fading of Greek risks following their drawdown,” Goldman Sachs said in a note. “While performance potential might be limited in the near-term after the strong rebound, several supportive fundamental factors should help outperformance of European vs. U.S. equities until year-end.”
The investment bank believes factors like the weak euro, easing monetary policy and rebound in economic growth will bolster European markets.
Consequently, ETF investors interested in capturing Eurozone growth but are also concerned about the euro can look to currency-hedged ETFs. Over the past month, the euro-currency hedged Deutsche X-trackers MSCI EMU Hedged Equity ETF (NYSEArca: DBEZ) gained 6.5%, iShares Currency Hedged MSCI EMU ETF (NYSEArca: HEZU) rose 6.7% and WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) increased 6.1%. [After a Pause, Investors Return to Euro Hedged ETFs]
Moreover, Goldman Sachs is overweight Italy, Spain and Germany. Investors can also gain exposure to the three markets through currency-hedged country-specific ETFs, including the recently launched iShares Currency Hedged MSCI Italy ETF (NYSEArca: HEWI) and iShares Currency Hedged MSCI Spain ETF (NYSEArca: HEWP). Additionally, there are a number of currency-hedged Germany choices, including the iShares Currency Hedged MSCI Germany ETF (NYSEArca: HEWG), Deutsche X-trackers MSCI Germany Hedged Equity Fund (NYSEArca: DBGR) and WisdomTree Germany Hedged Equity Fund (NasdaqGM: DXGE). [iShares Unveils Massive Expansion to Currency Hedged Suite]
Bank of America Merrill Lynch’s July Fund Manager Survey also revealed increased appetite to overweight European markets, with 40% of participants overweighting the Eurozone and more intended to raise the regional exposure on a 12-month outlook.