The recent decline in the Euro has been relatively rapid falling by close to 5% since the surprise outcome of the US elections1. However, in reality this has only served to accelerate a trend that has been apparent from our point of view for most of the year. The Euro’s recent peak versus the USD was in early May when it was trading at over €1.152 to the USD, while it’s now trading at €1.057, a fall of 8.38%3. The prospects for the Euro are also shrouded in political risk uncertainty with the Italian referendum in December 2016 and upcoming elections in France and Germany in 2017.
WisdomTree’s export-oriented UCITS ETF, Europe Equity UCITS ETF (HEDF), features Eurozone companies that derive more than 50% of their revenue outside Europe. We expect that these companies may benefit from the Euro’s weakness and the anticipated pickup in economic growth in markets such as the US. During the time3 that the Euro has fallen by 8.38%, the index that our UCITS ETF, HEDF, tracks (the WisdomTree Europe Equity Index) has risen by 4.02%, outperforming the broad benchmark, MSCI EMU which has risen by 2.26%. Additionally, HEDF has outperformed the Euro STOXX 50 which has risen by 2.10%.
If the Euro heads to parity versus the USD – or potentially overshoots it – European investors may wish to consider a large cap, liquid basket of export-oriented stocks. The unhedged WisdomTree Europe Equity UCITS ETF, HEDF, provides such an exposure. Investors could also consider the WisdomTree Europe Equity UCITS ETF USD Hedged, which is a share class with a USD hedge providing investors with both an exposure to export-oriented stocks and a long USD position.
1 Date range: 3 November 2016 to 24 November 2016
2 2nd May 2016
3 2nd May 2016 to 24th November 2016
For investment professionals only. This communication has been provided by WisdomTree Europe Ltd which is an appointed representative of Mirabella Advisers LLP which is authorised and regulated by the Financial Conduct Authority. Please view our full disclaimer. View our Conflicts of Interest Policy and Inventory at www.wisdomtree.eu/cofi.