Investors are funneling billions of dollars into international markets and related exchange traded funds as more turn to seek out opportunities outside a pricey U.S. equity market.
Global fund flows reveal a shift out of U.S. equity funds and into European and emerging market funds over the past few weeks, and analysts expect recent developments could keep the trend going, the Wall Street Journal reports.
For instance, among the most popular plays over the past week, the iShares MSCI EMU ETF (NYSEArca: EZU) attracted $876 million in inflows while the iShares MSCI EAFE ETF (NYSEArca: EFA) added $740 million and Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) saw $396 million in inflows, according to XTF data.
Supporting the improved international outlook, European equities have been reporting improved economic data for months. The European corporate earnings season is also on track for its strongest quarter in a decade, according to Morgan Stanley. Additionally, centrist Emmanuel Macron’s victory over far-right candidate Marine Le Pen in Sunday’s French presidential election assuaged wary investors.
“The French elections have loomed large…as a potential restraining force on risk appetite,” Michael Metcalfe, head of global macro strategy at State Street Global Markets, told the WSJ. “Assuming that earnings growth continues…and we see this expected rebound in the hard data” then markets can continue to push higher.