Investors can be forgiven if they were underallocated to Europe equities entering 2025. After all, stocks across the pond had spent considerable time lagging domestic counterparts. And that time was measured in multiple years.
That scenario shifted rapidly early this year with ETFs such as the ALPS O’Shares Europe Quality Dividend ETF (OEUR ) getting off to fast starts. They far outpaced the S&P 500 on news of elevated defense spending and talk that the European Central Bank would continue easing.
Those outlooks were proven accurate. But Europe stocks weren’t immune to a recent bout of volatility plaguing global equity markets. Some of OEUR’s larger rivals are sporting losses over the past month. That pullback could be the opportunity investors have been waiting for to get involved with European stocks. Some market observers believe they have become favorably “rerated” following the recent sell-off.
Europe Valuations Enticing Again
OEUR isn’t a dedicated value ETF, but it has some value traits. Those include sizable allocations to sectors often viewed as value destinations. That’s pertinent, because valuation long been central to the case for Europe stocks. But it’s also pertinent because but those multiples were also reset following recent profit-taking.
“European valuation multiples have become attractive after a wave of indiscriminate selling earlier in April, while European Union and German stimulus packages will likely boost economic growth,” noted BNP Paribas Asset Management.
Potentially auguring well for OEUR are at least two factors. First, the ALPS ETF traded higher over the past month, while many of its traditional rivals lost ground. Second, market participants may have overreacted to the potential impact U.S. tariffs could or could not have on European economies.
“Downbeat investor sentiment about Europe’s outlook now appears overplayed as core inflation has been contained, and lower interest rates should boost corporate capital spending and improve consumer confidence,” added BNP Paribas.
The French bank also highlighted some green shoots on the industrial demand. That is highly relevant for investors mulling OEUR because the fund devotes 28.35% of its roster to industrial stocks. That is by far its largest sector allocation.
Improving Sentiment
“Europe’s weak economic environment was primarily the result of weak industrial demand. The continent experienced a long industrial recession. However, sentiment has been improving in the wake of news of Germany’s stimulus measures. US tariff policy can still be a hurdle, but there are signs that Europe’s industrial recession is past its trough,” according to BNP Paribas.
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