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How to Trade Europe With ETFs Despite Economic Slowdown
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The Euro zone is slowing down. Its economy grew 0.2% sequentially in the third quarter of 2018, following 0.4% expansion in the previous period. It marked the weakest growth rate since the second quarter of 2014.
Among the bloc's largest economies, Germany (down 0.2%) and Italy (0.1%) saw their economies shrinking, while France reported growth (0.4%) and Spain expanded (up 0.6%). On the year-over-year basis, the GDP growth rate in the 19-country currency bloc was 1.6%, the lowest level since the fourth quarter of 2014.
Euro zone’s shares have also been bruised this year with Italy's budget dispute with the European Union, global trade war tensions, the region’s internal unrest and Brexit talks continuously posing threats.
While most of the Europe ETFs have been under pressure this year due to a host of tensions, there are some products that have lost lesser than the biggest fund on the region, namely Vanguard FTSE Europe ETF (VGK - Free Report) . We have mentioned a few of those hidden gems and highlight why these can be good investment options in the tumultuous time like now.
ProShares MSCI Europe Dividend Growers ETF (EUDV - Free Report)
The fund calls for quality exposure as the underlying MSCI Europe Dividend Masters Index targets companies that are currently members of MSCI Europe and have increased dividend payment each year for at least 10 years. The fund has lost (down about 12%) lesser than VGK (down 17%) this year (as of Dec 7, 2018) (read: ECB May Hike Rates After Summer 2019: ETFs to Gain).
First Trust STOXX European Select Dividend Index Fund (FDD - Free Report)
The dividend-focused fund is yet another stable exposure to the region. The underlying index consists of 30 high dividend-yielding securities selected from the STOXX Europe 600 Index. The fund yields 4.86% annually. It has lost 11.9% this year.
iShares Edge MSCI Min Vol Europe ETF
As the name suggests, the fund offers minimum volatility exposure. The underlying index comprises European developed market equities that have lower volatility characteristics relative to the broader European developed equity markets. The fund has shed about 8% in the year-to-date frame.
It is one of the better-positioned economies in Europe. The Norwegian economy grew 0.6% sequentially in the third quarter of 2018, after 0.4% expansion in the previous period and in line with market consensus. It marked the highest growth rate since Q2 2017. Also, oil prices could see better days ahead thanks to the recently struck output cut deal by the OPEC+. Since Norway is an energy-rich country, the deal bodes well for the fund. It has lost only 4.6% this year (read: Norway Hikes Rate for First Time in 7 Years: ETFs in Focus).
Franklin FTSE Europe Hedged ETF
The underlying FTSE Developed Europe RIC Capped Hedged Index is a market-capitalization weighted index representing the performance of large and mid-capitalization stocks domiciled in European countries classified as Developed. The fund is heavy on United Kingdom, France, Switzerland and Germany. It has receded only 5.4% this year.
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How to Trade Europe With ETFs Despite Economic Slowdown
The Euro zone is slowing down. Its economy grew 0.2% sequentially in the third quarter of 2018, following 0.4% expansion in the previous period. It marked the weakest growth rate since the second quarter of 2014.
Among the bloc's largest economies, Germany (down 0.2%) and Italy (0.1%) saw their economies shrinking, while France reported growth (0.4%) and Spain expanded (up 0.6%). On the year-over-year basis, the GDP growth rate in the 19-country currency bloc was 1.6%, the lowest level since the fourth quarter of 2014.
Euro zone’s shares have also been bruised this year with Italy's budget dispute with the European Union, global trade war tensions, the region’s internal unrest and Brexit talks continuously posing threats.
While most of the Europe ETFs have been under pressure this year due to a host of tensions, there are some products that have lost lesser than the biggest fund on the region, namely Vanguard FTSE Europe ETF (VGK - Free Report) . We have mentioned a few of those hidden gems and highlight why these can be good investment options in the tumultuous time like now.
ProShares MSCI Europe Dividend Growers ETF (EUDV - Free Report)
The fund calls for quality exposure as the underlying MSCI Europe Dividend Masters Index targets companies that are currently members of MSCI Europe and have increased dividend payment each year for at least 10 years. The fund has lost (down about 12%) lesser than VGK (down 17%) this year (as of Dec 7, 2018) (read: ECB May Hike Rates After Summer 2019: ETFs to Gain).
First Trust STOXX European Select Dividend Index Fund (FDD - Free Report)
The dividend-focused fund is yet another stable exposure to the region. The underlying index consists of 30 high dividend-yielding securities selected from the STOXX Europe 600 Index. The fund yields 4.86% annually. It has lost 11.9% this year.
iShares Edge MSCI Min Vol Europe ETF
As the name suggests, the fund offers minimum volatility exposure. The underlying index comprises European developed market equities that have lower volatility characteristics relative to the broader European developed equity markets. The fund has shed about 8% in the year-to-date frame.
iShares MSCI Norway ETF (ENOR - Free Report)
It is one of the better-positioned economies in Europe. The Norwegian economy grew 0.6% sequentially in the third quarter of 2018, after 0.4% expansion in the previous period and in line with market consensus. It marked the highest growth rate since Q2 2017. Also, oil prices could see better days ahead thanks to the recently struck output cut deal by the OPEC+. Since Norway is an energy-rich country, the deal bodes well for the fund. It has lost only 4.6% this year (read: Norway Hikes Rate for First Time in 7 Years: ETFs in Focus).
Franklin FTSE Europe Hedged ETF
The underlying FTSE Developed Europe RIC Capped Hedged Index is a market-capitalization weighted index representing the performance of large and mid-capitalization stocks domiciled in European countries classified as Developed. The fund is heavy on United Kingdom, France, Switzerland and Germany. It has receded only 5.4% this year.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>