You can bet that Europe is keeping an eye on what the markets are doing in the U.S. The hope is that a vaccine rally can continue to power equities through the rest of 2020. With optimism and a renewed risk-on sentiment running rampant in the global capital markets, including Europe, it’s still wise to keep those currencies hedged in these volatile times.
The below European equities ETFs are a great place to start:
Xtrackers MSCI Europe Hedged Equity ETF (DBEU ): seeks investment results that correspond generally to the performance, before fees and expenses, of the MSCI Europe US Dollar Hedged Index. The fund, using a “passive” or indexing investment approach, seeks investment results that correspond generally to the performance, of the underlying index, which is designed to track the performance of the developed markets in Europe, while mitigating exposure to fluctuations between the value of the U.S. dollar and the currencies of the countries included in the underlying index. It will invest at least 80% of its total assets in component securities of the underlying index.
Xtrackers MSCI Eurozone Hedged Equity ETF (DBEZ ): seeks investment results that correspond generally to the performance, before fees and expenses, of the MSCI EMU IMI US Dollar Hedged Index. The fund, using a “passive” or indexing investment approach, seeks investment results that correspond generally to the performance, of the underlying index, which is designed to track the performance of equity securities based in the countries in the European Monetary Union, while seeking to mitigate exposure to fluctuations between the value of the U.S. dollar and the euro. It will invest at least 80% of its total assets in component securities of the underlying index.
While there’s a risk-on sentiment brewing, staying hedged via the local currency can give ETF investors that safety component in case things go awry. With the 24-7 news cycle always a factor, vaccine reports can keep the markets fluxing up and down like a yo-yo.
“The FTSE is on the rise yet again, with strong Asian data helping to boost recovery hopes as we move forward. Meanwhile, the pound looks set for a volatile period as Brexit talks accelerate," said Joshua Mahony, Senior Market Analyst at IG, an online forex training provider. “European markets have resumed the risk-on theme that dominated much of last week, with overnight gains in Asia setting the tone for a positive start today."
“The latest economic data from Japan and China helped bolster the recovery theme, with the Asian rebound taking shape against a backdrop of continued success in keeping the virus relatively subdued," Mahony added. “A 5% Q3 GDP figure from Japan may not seem entirely impressive given the recent figures throughout the US (33.1%), UK (15.5%), and eurozone (12.6%)."
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