There is budding enthusiasm for European equities as some high-level traders imagine the continent may very well be one of many best-performing areas this 12 months.
Nonetheless, traders have heard this story earlier than, solely to be left upset. For these pondering this 12 months shall be completely different – and there is some proof suggesting it will likely be – the FlexShares Developed Markets ex-US High quality Low Volatility Index Fund (NYSE: QLVD) supplies a prudent avenue to European fairness publicity.
QLVD holds practically 230 shares, and whereas Japan holds its largest particular person nation publicity, it additionally options ample European allocations. The fund contains Swiss, British, Danish, French, German, and Dutch shares on its roster. These international locations mix for about 43% of QLVD’s geographic weight. That may very well be a plus over the rest of this 12 months.
“We expect there’s a good likelihood that Europe outperforms all main areas this 12 months for the primary time in a calendar 12 months since 2000,” in line with a Morgan Stanley analysis word cited by CNBC.
Advantages on the Sector Degree
Whereas international traders are principally optimistic on European equities this 12 months, some sectors are most well-liked greater than others, together with healthcare and the area’s resurgent banking names. QLVD allocates practically 32% of its weight to monetary companies and healthcare shares.
There’s additionally alternatives available with European power producers and energy suppliers. Owing to its standing as a low volatility fund, QLVD has no power publicity, however its utilities weight is respectable at 7.58%.
Including to the case for QLVD as an oblique Europe play is that earnings energy on the continent is lastly on the mend. For years, one of many major causes European equities have been cheap relative to U.S. counterparts was as a result of the previous had slack earnings progress. That might change this 12 months, significantly with cyclical sectors again in vogue.
“Europe’s worth underperformance in 2020 was pushed by a materially inferior earnings per share (EPS) pattern. Put up this bigger fall, Europe has the scope to get pleasure from an even bigger bounceback in EPS over the subsequent 12-18 months than a lot of its friends, particularly the US given the potential for a company tax hike in 2022,” in line with Morgan Stanley.
QLVD is increased by 5.35% year-to-date and 1.70% over the previous month. The FlexShares fund sports activities a dividend yield of two%.
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The views and opinions expressed herein are the views and opinions of the creator and don’t essentially mirror these of Nasdaq, Inc.