Finally, the QE launch in the Euro zone appears to be paying off. The gradual easing in deflation, improving business morale, rising retail sales suggesting growing consumer confidence as well as flying stock markets are pointing to this fact. Europe Hedged Equity Fund (HEDJ) has added over 20% so far this year (as of April 6, 2015) bolstered by the dual dose of ultra-easy monetary policies and currency hedging technique.
Needless to say, the initiation of the QE program and negative interest rates in the Euro zone devalued the European currencies massively to the greenback. This was truer as the Fed is considering policy tightening sometime this year. This has in turn bolstered investors’ interest in currency-hedged investments across the pond.
However, this does not mean that un-hedged European versions are reeling under pressure. In fact, regular European ETFs held up strongly this year. The largest European ETF Vanguard FTSE Europe ETF (VGK) is up 6.4% in the YTD frame compared to the just 1.1% gain in SPDR S&P 500 ETF (SPY).
And why wouldn’t it be? After all, German business morale grew for the five straight months to touch an eight-month high in March. French business morale reached a three-year high last month while that in Italy was at a four-year high indicating strengthening firms’ sentiments on the top three countries of the Euro zone.
Confidence was more solid among consumers as the index recently hit a 13-year peak for Germany, a five-year high for France and a seven-year high for Italy. Undoubtedly, the bourses of these countries and the related ETFs have held their own this year. But there are some other ETFs which deserve mention apart from the top-tier trio as the former country ETFs displayed strong trend lately.
So for investors seeking cheap foreign plays that are doing extraordinarily, a closer look at any of the following three ETFs could be an intriguing idea. These funds managed to stay profitable although these are not currency-hedged versions.