European equities have been among the world’s best performers this year, and that’s saying something, That’s because the Trump administration made the European Union (EU) one of its primary tariff targets. As of yet, the U.S. and the EU don’t have a firm accord in place. President Trump has set a deadline of Aug. 1 to establish a trade agreement.
But investors may want to consider being proactive with European equities prior to Aug. 1. That objective can be accomplished with ETFs, including the WisdomTree Europe Quality Dividend Growth Fund (EUDG ).
EUDG tracks the WisdomTree Europe Quality Dividend Growth Index. The fund entered Tuesday with a YTD gain of nearly 16%. That confirms the ETF has benefited from themes including the weak dollar, increased defense spending and market participants rotating into other developed markets amid U.S. trade volatility. A new trade package could be just what the doctor ordered for more EUDG upside in the back half of the year.
Why a Trade Deal Could Boost EUDG
Sector allocations matter and EUDG is proof positive of that fact. The ETF’s 22.60% weight to industrial stocks, its biggest sector weight, has contributed to its 2025 bullishness. That’s because multiple European nations have pledged to boost defense spending.
The defense spending element’s likely baked into EUDG’s current price. But there may be more potential upside from other sectors. That includes some groups offering attractive valuations.
“A few sectors in Europe remain undervalued despite the rally, says Field. The list includes healthcare and consumer discretionary,” noted Michael Field, a European market strategist for Morningstar Holland.
For investors considering EUDG, that commentary is pertinent. That’s because the ETF allocates nearly a third of its weight to healthcare and consumer cyclical stocks. Field highlighted British pharmaceuticals giant GSK, a member of the EUDG portfolio, as one of the top ideas among European healthcare names.
Some European luxury goods makers, several of which call EUDG home, have struggled this year amid the aforementioned trade tensions. That indicates that group might rebound if the U.S. and EU allow cooler heads to prevail. If that happens, EUDG could deliver more upside.
Europe Has Been Winning
“Europe, as a whole, has been winning is the answer,” added Field. “If you look over the last quarter or even year to date, Europe has been the real star performer in terms of global markets, ahead of the US, ahead of the global market index as an average. So, that’s good news for European stocks and investors as a whole.”
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