As the markets rebounded from the last year’s pullback, many shunned the European markets. However, some may want to look back into Europe region-related ETFs as some of bumps are smoothed out.
European markets have been on the road to recovery, with the benchmark Stoxx Europe 600 up 16% this year, or falling just short of the 17% gain the S&P 500. Meanwhile, the broad Europe ETF plays like the Vanguard FTSE Europe ETF (NYSEArca: VGK) that’s up 14.3% Ytd.
Europe’s equities also look more attractive, with valuations of European and U.S. equities exhibiting their widest divergence since the end of 2016 on certain measures. According to FactSet data, the Stoxx Europe 600 was trading at 14 times forecast earnings, compared to the S&P 500’s 17 times, which represent a wider gap than its long-term average over the past decade.
Emiel van den Heiligenberg, head of asset allocation at Legal & General Investment Management, though, argued that the general pessimism over European markets has created an opportunity because the “news flow doesn’t have to be that positive for people to start buying,” the Wall Street Journal reports.
The strategist argued that the regional economy could stabilize or recover in coming months as countries roll out more supportive fiscal policies. Additionally, he is bullish on the basic-resources sectors of Europe.
“That’s a European sector, but the main play there is on China,” van den Heiligenberg added, predicting a recovery in the Chinese economy following a series of generous fiscal policies.
European markets have been mired by political risks surrounding Brexit, government finances in Italy and weak German growth. Additionally, talks of a new tariff spate with the U.S. also dampened investors’ moods. Sentiment also worsened after the European Central Bank cut forecasts for growth in early March.
Foreign investors also lost interest as the euro currency depreciated to a 22-month low against the U.S. dollar, which diminishes U.S. dollar returns. However, the weaker currency does make Europe’s export industries more competitive on the world stage.
11 Europe Equities ETFs under 10 Basis Points
|VGK||Vanguard FTSE Europe ETF||0.09%|
|EURZ||Xtrackers Eurozone Equity ETF||0.09%|
|GRMY||Xtrackers Germany Equity ETF||0.09%|
|FLEE||Franklin FTSE Europe ETF||0.09%|
|FLEH||Franklin FTSE Europe Hedged ETF||0.09%|
|FLFR||Franklin FTSE France ETF||0.09%|
|FLGB||Franklin FTSE United Kingdom ETF||0.09%|
|FLGR||Franklin FTSE Germany ETF||0.09%|
|FLIY||Franklin FTSE Italy ETF||0.09%|
|FLSW||Franklin FTSE Switzerland ETF||0.09%|
|BBEU||JPMorgan BetaBuilders Europe ETF||0.09%|
|IEUR||iShares Core MSCI Europe ETF||0.10%|
* Assets in thousands of U.S. Dollars. Assets and Average Volume as of 2019-04-26 20:15:04 UTC
For investors looking for the continued upside in emerging market assets, whether driven by a weakening USD or continued developments around trade, the Direxion MSCI Emerging Over Developed Markets ETF (NYSEArca: RWED) offers them the ability to benefit not only from emerging markets potentially performing well, but from emerging markets outperforming developed markets.
Conversely, if investors believe that resolutions to the big issues impacting sentiment today are in motion, the Direxion MSCI Developed Over Emerging Markets ETF (NYSEArca: RWDE) provides a means to not only see developed markets perform well, but a way to access a convergence/catch-up in performance of DM relative to EM, a spread that has clearly widened over the past 6 months.
For more information on the European markets, visit our Europe category.