Global Markets Wrap: Europe ETFs Remain in Focus
International ETFs have lured in billions of dollars of assets this year, with European funds in focus amid strong equity valuations and performance across the pond.
Global equity funds have been the largest asset gatherers and among the best performers of 2023, pulling in $28.5 billion, as of March 3, according to etf.com data. Investors have flocked to better-valued stocks overseas with lucrative returns in those markets, and the Fed’s impact on U.S. markets taking a toll on domestic counterparts.
Among the most popular international funds are the JPMorgan BetaBuilders Europe ETF (BBEU) and the Vanguard FTSE Europe ETF (VGK), which have brought in year to date $5.7 billion and $1 billion, respectively, according to etf.com data. Both funds have leapt almost 7% year to date, according to data from the Wall Street Journal. That’s compared to a 1% gain for the SPDR S&P 500 ETF Trust (SPY) during the same period.
The STOXX Europe 600, a stock index of European equities, has jumped 5.6% so far this year and may also receive a boost in the aftermath of conversations between the U.S. and European Union.
On Friday, European Commission President Ursula von der Leyen met with U.S. President Joe Biden to discuss the nations’ tensions over trade and focus on implementing a green economy. The talks aim to resolve issues between the two regions as European nations have voiced concerns over U.S. policies such as the Inflation Reduction Act potentially harming Europe’s economy.
“The outperformance into the end of last year, and obviously the outperformance has continued so far this year, creates a little bit of a self-reinforcing feedback loop where people are chasing performance,” J.P. Morgan global market strategist David Lebovitz said to etf.com, referring to international equity performance overall.
He added the reason for the more optimistic view on European securities is threefold: valuations in European nations have continued to be cheaper than their U.S. affiliates; government spending has accelerated in Europe after the Great Financial Crisis; and higher rates have benefited European markets.
“Europe and international markets more broadly are in a better position to compete with the U.S. than was the case for the 10 years after the GFC when rates were anchored at zero, and central bankers had their foot on the throat of market volatility,” Lebovitz said. “We are more constructive today on the opportunity outside of the U.S. than we have been in quite some time.”
Contact Shubham Saharan at shubham.saharan@etf.com
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