FEZ ETF

The SPDR® EURO STOXX 50 ETF has underperformed the S&P 500 by 165 percentage points over the last decade but could benefit if European natural gas prices drop. European equities might surge if Donald Trump ends the Ukraine-Russia war, reducing natural gas prices and boosting sectors like Industrials, Consumer Cyclical, and Financials. Mario Draghi's pro-business reforms could enhance European competitiveness, focusing on technology, innovation, healthcare, energy, and capital markets union, potentially re-rating top European stocks.

Despite past errors, I believe international stocks, particularly in the Eurozone, will soon outperform, making the SPDR® EURO STOXX 50 ETF appealing. The FEZ ETF offers concentrated exposure to Europe's economic backbone, with top holdings in diverse sectors like semiconductors, luxury goods, and energy management. The ETF provides stability and growth potential, hedges against a weak dollar, and offers a 2.46% distribution yield, but has risks like currency fluctuations.

SPDR Euro Stoxx 50 ETF (FEZ) tracks the performance of the Euro Stoxx 50 index and has $3.8B in assets. FEZ is a sector diversified fund with a strong tilt towards France and a combination of defensive and growth-oriented sectors. The fund has seen strong net inflows, indicating investor conviction in a European recovery, but its performance is dependent on ECB rate movements and the impact of the Olympics on French brands.

FEZ invests in the 50 largest European companies within each industry. It trades with a much cheaper valuation than most U.S. equity funds, even some international ones. Performance has been mixed these past few years.

SPDR® EURO STOXX 50 ETF has delivered acceptable returns of around 16% over the past year but has still lagged the S&P 500 Index.

European stocks eyed fresh record highs on Friday as sentiment was lifted by upbeat U.K. retail sales data and strong results from a raft of top companies.

SPDR EURO STOXX 50 ETF offers low expenses, solid performance, and concentrated exposure to European equities. Profit margins of European companies may contract amid a general slowdown, suggesting a "Hold" rating for now. FEZ ETF has outperformed other Europe ETFs, but may not be suitable for those seeking absolute diversification and the lowest expenses.

The European Central Bank has raised key interest rates for the tenth consecutive time in an effort to fight inflation. It also updated forecasts, which slash 2024 growth by 50bps. With rates likely to stay elevated until inflation comes off to the ECB's target levels, the economy can stay uncertain over the next year. Index trackers like the SPDR Euro Stoxx 50 ETF can make good buys right now, as they are diversified and have high-quality holdings.

European stocks have a cheap valuation compared to the US, but profit margins are unsustainably high and likely to revert to the mean. The SPDR EURO STOXX 50 ETF has a dominant sector exposure in consumer discretionary and financials, with a high expense fee eating into the dividend yield. Returns on the FEZ are likely to be limited to the dividend yield, which at 3.2% is inferior to government bonds from a risk-reward perspective.