Europe is Back in Vogue: Here’s Why Investors are Loving it

Investors Remain Bullish on European ETFs Despite Political Turmoil

Despite the volatility triggered by the elections in the UK and France, investors continued to pour money into European exchange-traded funds in June.

Americans, in particular, seemed unfazed by the political climate, as the $1.3 billion net inflow into European equity ETFs marked the highest since February 2023, according to BlackRock data.

European investors also showed confidence, with a net purchase of $910 million, making June the fourth consecutive month with over $2 billion pouring into a continent whose stock markets have been on a decline.

Insights and Optimism

Karim Chedid, head of investment strategy for iShares in the Emea region at BlackRock, noted that US investors have become significant buyers in the European market despite the political spotlight on the region due to elections.

Chedid remains optimistic, highlighting the improvement in European stocks’ earnings after a decade of stagnation.
He also pointed out better macroeconomic data in Europe, especially compared to the previous period.

UK Focus

Regarding the UK, the demand for London-focused equity ETFs hit a four-year high, with net inflows of $1.9 billion since the beginning of the year, reflecting a positive sentiment shift also in government bonds.

Chedid mentioned a recovery in both UK government bonds and stocks, attributing it to the anticipation of rate cuts by the Bank of England in the third quarter.

Market Trends

Overall, global ETF flows reached $128.1 billion in June, with the US stock market still dominating demand despite a reduced global share from May.
US-focused ETFs saw a record $15 billion inflow, driven mainly by growth stocks outperforming value stocks.

On the fixed income side, US bond ETFs attracted the most inflows, with a strong demand for US Treasuries.
However, European and emerging markets bonds also saw solid interest.

In Conclusion

Gold ETFs experienced a rebound in June after a year of net outflows, with $1.3 billion in net purchases driven by Emea investors, underlining geopolitical risk concerns and central banks’ gold purchases.

iShares dominated ETF flows with record monthly inflows in June, while Vanguard and State Street Global Advisors had mixed results, hinting at shifting investor preferences and fee considerations in ETF selection.

Despite challenges, the ETF market remains dynamic and responsive to global economic and geopolitical developments, offering investors a wide range of options to navigate uncertain market conditions.