In the early innings of 2025, few asset classes have shined as bright as European stocks and related ETFs.
After a multiyear stretch of lagging U.S. equities by wide margins, European stocks are roaring back with a vengeance. Just look at the WisdomTree Europe Quality Dividend Growth Fund (EUDG ). As of Monday, February 24, the ETF was sporting a year-to-date gain of 10.63%. That’s more than quadruple the 2025 returns offered by the S&P 500.
EUDG turns 11 years old in May. It follows the WisdomTree Europe Quality Dividend Growth Index. The fund could be in for more upside as this year moves along. That prediction isn’t much of a stretch considering professional investors are as bullish on European stocks as they’ve been in a year. That’s according to a recent Bank of America survey of fund managers.
EUDG Ebullience Justified
Some of the enthusiasm for European stocks held by professional money managers centers on the thesis that following national elections in Germany, that country will likely boost monetary stimulus. That’s pertinent to investors considering EUDG because the eurozone’s largest economy accounts for almost 12% of the ETF’s portfolio.
On the monetary policy front, fund managers polled by Bank of America believe the European Central Bank (ECB) has the latitude to cut interest rates multiple times this year. That could be a catalyst for EUDG because the ETF allocates more than 40% of its weight to stocks from eurozone economies.
“Inflation expectations are also shifting. A net 59% of fund managers foresee lower inflation in Europe, while only 4% expect a decline in global inflation,” reported Piero Cingari for Euro News. “This divergence suggests investors believe European inflation will cool faster than in other major economies, potentially giving the ECB more room to cut rates.”
EUDG Could Deliver More Upside
Expectations that European economies will grow at rates outpacing those of other developed economies this year are also supportive of the 2025 case for ETFs such as EUDG. Additionally, some market observers believe that the issues that could confound U.S. stocks this year aren’t applicable in Europe, adding that the value for case for European equities is credible and compelling.
“The survey shows a net 66% of participants expect near-term gains for European equities, up from 44% last month, while 76% foresee further upside over the next year, rising from 56%,” according to Euro News.
EUDG could deliver more upside if the Russia-Ukraine war ends and if either or both of the ECB and the Federal Reserve lower interest rates.
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