Global equity markets are tumbling to start 2016, forcing investors to revisit safe-haven investments while ditching riskier assets. However, that does not mean developed markets equities are not offering opportunity. In particular, European stocks could reward investors later this year.
Last year, Eurozone equities were leading during the first half of the year as the ECB enacted an aggressive bond purchasing program and cut rates. However, the markets soured on global growth concerns and a commodity rout in August.
The ECB has been buying bonds to lower debt yields across the Eurozone, forcing investors to turn to riskier assets, like stocks, to generate decent returns. Additionally, the ECB’s actions has also depreciated the euro currency, which has benefited the regions’ exporters. [Europe ETFs Bounce on Improved Outlook for Exporters]
Increases to the ECB’s QE regime could bolster the fortunes of several well-known exchange traded funds, including the Deutsche X-trackers MSCI EMU Hedged Equity ETF (NYSEArca: DBEZ), iShares Currency Hedged MSCI EMU ETF (NYSEArca: HEZU) and the WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ).
“The European domestic economic recovery is in an early stage and accelerating, particularly in peripheral Europe, creating significant catch-up potential relative to the U.S.,” according to part of a Goldman Sachs note posted by Barron’s.