ETFs to Weather Europe’s Debt Storm

ETF Trends

After the recent European elections, notably in France and Greece, the markets experienced another period of high volatility that left stocks and exchange traded funds reeling. Investors seeking to position themselves ahead of another Eurozone-induced tussle will want to jot down these dates to come.

According to the BlackRock Investment Institute, there are eight pivotal events in the Eurozone that should be highlighted, writes Russ Koesterich, CFA, Managing Director and Global Chief Investment Strategist for iShares :

  • On May 31, Ireland will vote on the Irish Referendum on Stability Treaty. The rules will make the governments keep a balance between their income and their spending – countries that do not implement this referendum will not be eligible to access the European Stability Mechanism, or Eurozone’s bailout fund.
  • Between June 10 to 17, French Legislative Elections will take place. BlockRock expects the Socialist majority to come out top.
  • The real wildcard will be the Greek Elections on June 17.
  • Over June 18 and 19, the G-20 Summit will convene to talk about stability and growth.
  • Over June 21 to 22, the Eurogroup/Ecofin Meting will take place to go over the Greek election and Greece’s place in the European Union.
  • The European Summit will take place over June 28 and 29 to discuss the growth outlook.
  • On July 1, the European Stability Mechanism will decide which banks are approved for lending.
  • Lastly, on July 5, the European Central Bank will meet to discuss possible rate cuts that could help the ailing economy.

Koesterich predicts that volatility and pressure on the equity market may ease if certain events come to pass, notably if Greece doesn’t exit the euro or the crisis lessens. Additionally, a yes vote in Ireland, ECB willingness to support Greece and a pro-bailout Greek vote would also help mitigate market concerns. [Stock ETFs Brace for Worst as Greece, Europe Play ‘Chicken’]

“But given the ‘if’ in the previous statement and that what ultimately will happen during many of the key events is really ‘anybody’s guess,’ markets are likely in for some rough ups and downs in the weeks ahead —  at least until we have a more credible scenario for preventing a disorderly Greek default or more certainty around Greece’s future,” Koesterich said in the article.

Koesterich also suggests investors should take high dividend, large-cap stocks and defensive sector picks to help hedge against the bumps ahead:

  • iShares High Dividend Equity Fund (HDV - News)
  • iShares Emerging Markets Dividend Index Fund (DVYE - News)
  • iShares Dow Jones International Select Dividend Index Fund (IDV - News)
  • iShares S&P Global 100 Index Fund (IOO - News)
  • iShares S&P Global Telecommunications Sector Index Fund (IXP - News)

For more information on the Eurozone, visit our Europe category.

Max Chen contributed to this article.

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