Is There Value in European Equity ETFs?
Maybe not, as austerity measures, bank deleveraging, and potential political instability create a challenging operating environment in the near and medium term.
European equities' low valuations may present an attractive long-term investment opportunity. If you're looking to access this market, Vanguard MSCI Europe ETF (VGK) is a great way to gain exposure. However, we would tread lightly here. In the near term, we expect trading in European equities to be driven more by headlines regarding the debt crisis rather than by fundamentals. And over the longer term, there is plenty of uncertainty over Europe's ability to effectively contain the ongoing crisis.
To date, European leaders have mainly reacted to issues when they bubble to the surface and have yet to address the root causes of the crisis, which include a lack of fiscal integration and trade imbalances within the eurozone because of different degrees of competitiveness among the member countries. Recently implemented initiatives, such as fiscal austerity in the troubled peripheral countries as well as in the United Kingdom, will likely stunt, if not choke, growth for the next few years and exacerbate the precarious fiscal situation of these countries. And any growth-friendly monetary easing by the European Central Bank, or ECB, in the near term may be constrained as inflation trends higher than expectations.
Patricia Oey has a position in the following securities mentioned above: EWG, EWU. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.