“We see European stocks as big beneficiaries of the broadening global reflationary environment and believe investors are too skeptical of the region’s prospects,” Richard Turnill, Global Chief Investment Strategist for BlackRock, said in a research note, pointing out that BlackRock upgraded its view on European equities.
Investors who believe the euro currency will continue to weaken and are bullish on the Eurozone’s outlook can turn to currency-hedged ETF options, such as the the Deutsche X-trackers MSCI EMU Hedged Equity ETF (NYSEArca: DBEZ), iShares Currency Hedged MSCI EMU ETF (NYSEArca: HEZU) and WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ). These currency-hedged Europe ETFs may outperform non-hedged Europe funds if the euro continues to depreciate against the U.S. dollar.
Still, there is the potential for political volatility. In addition to the aforementioned France election, voters in the Netherlands head to the polls next month while Germany and Italy hold elections later this year. However, there are upside catalysts for Europe ETFs.
“European stocks should also benefit from the reflation trade — the boost U.S. markets are seen getting from lower taxes and new government spending on infrastructure — which has been driving U.S. stocks since President Donald Trump was elected,” according to CNBC.
For more information on the European markets, visit our Europe category.