Big Money Is Betting On Europe, Should You? 3 ETFs To Watch

European fund managers are optimistic that rising economic growth will fuel a rally in the region's stocks.

This bullishness is already reflected in performance, per a Financial Times report. The Stoxx Europe 600 index has climbed nearly 10% in this year thus far, outpacing the S&P 500's 4% rise and Japan's Topix, which has seen a slight decline.

For investors looking to ride this momentum, here are three ETFs offering strong exposure to European stocks:

SPDR Euro Stoxx 50 ETF FEZ: The SPDR EURO STOXX 50 ETF has been gaining momentum, recently hitting a 52-week high and climbing 15.16% from its 52-week low of $47.11 per share.

What's inside? FEZ tracks the EURO STOXX 50 Index, which represents the performance of the largest companies in the Eurozone across 19 different sectors. With an annual expense ratio of 0.29%, it offers broad exposure to Europe's biggest players.
Why is it moving? Optimism over a potential peace deal between Ukraine and Russia, fueled by recent talks between U.S. and Russian officials, has lifted European equities. Strong earnings reports from major European firms have also contributed to the fund's rally.

Also Read: Ukraine Raises Alarm Over US-Russia Talks on War Without Kyiv’s Involvement

Vanguard FTSE Europe ETF VGK: This ETF provides a broader European exposure, with holdings in companies across sectors. Novo Nordisk NOVO, AstraZeneca AZN and Nestle are among the top names adorning the portfolio.

What's inside? VGK tracks the FTSE Developed Europe Index, covering a wide range of European equities beyond just the Eurozone, including the U.K. The fund's low expense ratio of 0.09% makes it a cost-effective way to gain diversified exposure.
Why is it moving? Sentiment around European stocks has improved. Investors are relieved that the EU, seen as a potential target of Trump's “America First” trade policies, has so far avoided new tariffs.

Xtrackers MSCI EAFE Hedged Equity ETF DBEF: Currency fluctuations can impact returns when investing in foreign stocks, which is where DBEF comes in. This fund offers exposure to European, Australasian, and Far Eastern stocks while hedging against currency risk.

What's inside? DBEF tracks the MSCI EAFE Index but incorporates a hedge against fluctuations in the U.S. dollar. This makes it an appealing option for U.S.-based investors looking to minimize currency-related volatility. The expense ratio is 0.36%.
Why is it moving? With the euro weakening against the dollar, European earnings might look more attractive to foreign investors.

Europe: The Best-Performing Equity Market

Bank of America's latest survey of 200-plus European fund managers, overseeing $482 billion in assets, found that 38% see European equities as undervalued. That’s the highest level in six years, according to the Financial Times.

"A plurality of investors expects Europe to be the best-performing equity market globally this year," BofA researchers noted, per Financial Times. A net 12% of respondents are now "overweight" European equities, compared to a net 25% who were "underweight" in December.

The rally in European equities is being powered by renewed economic optimism, potential fiscal stimulus in Germany, and a shift in sentiment among global investors. However, some experts urge caution. Pictet Asset Management's Luca Paolini warns that the rally is “based on hope, not facts,” with sentiment possibly overrunning fundamentals.

Whether the rally is sustainable remains to be seen, but for now, European stocks are back in focus.

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