European ETFs Gain Momentum as Global Markets Shift
European equities outperform U.S. stocks as strong earnings and defense spending drive investor confidence amid global uncertainty.
The global equity landscape is shifting, as growing market uncertainty stemming from the Trump administration's announced and enacted policy actions is causing a shift in sentiment and leading investors to look at other equity markets. Year-to-date, European equities, International equities, Emerging Market equities, and global equities, excluding the U.S., have all outperformed the U.S. equities.
While the idea of U.S. equities exceptionalism was in full effect in previous years due to the strong performance and growing concentration of big tech within U.S. equities, in the present, the performance of the Magnificent Seven – particularly Telsa – has been an anchor weighing down the S&P 500 Index.
More broadly, the immediate outlook for the U.S. economy is one of lower growth, greater inflationary pressures, and increased complexity regarding economic and financial cooperation. Conversely, the sentiment and outlook for European equities have shifted materially, the impetus being strong fourth-quarter corporate earnings and a willingness to increase defense spending in the region; the latter has seen equities of European defense companies increase significantly.
Investing in European Equities
For Canadian investors looking to broaden their investment opportunity set, as mentioned in previous articles, there are ETF solutions that provide exposure to international equities and emerging markets equities. Similarly, for investors looking to allocate to European equities, the below ETFs solutions are worth consideration:
The CI Europe-Hedged Equity Index ETF (Tickers: EHE/EHE.B) tracks the price and yield performance of the WisdomTree Europe CAD-Hedged Equity Index, which reflects European dividend-paying companies in the WisdomTree International Equity Index that are domiciled in Europe and are traded in Euros, have at least $1 billion market capitalization, and derive at least 50% of their revenue in the latest fiscal year from countries outside of Europe. The fund's top holdings include LVMH Moet Hennessy Louis Vuitton SE, Siemens AG, and ASML Holding.
The RBC Quant European Dividend Leaders ETF (Tickers: RPD/RPDH/RPD.U) provides investors with exposure to high-quality European firms that are consistent and growing dividend payers. The fund's managers utilize a quantitative multi-factor approach to gauge a company's financial strength, with the aim of creating a diversified portfolio capable of providing regular income from dividends and that has the potential for long-term capital growth. The fund's top holdings include Roche Holding, Novartis AG, and ASML Holding.
The Vanguard FTSE Developed Europe All Cap Index ETF (Ticker: VE) tracks the performance of the FTSE Developed Europe All Cap Index, which provides comprehensive exposure to large-, mid-, and small-capitalization stocks of companies located in developed European markets. The fund's top holdings include SAP SE, ASML Holding, and Novo Nordisk A/S.
Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.
