The iShares Europe ETF has significantly underperformed the S&P 500 over the past decade, with dividend growth standing at just 2.41%. Sentiment on European equities has shifted in 2025, with outperformance relative to the S&P 500 driven by a weak dollar and cheaper valuations. Looking ahead to 2026, I expect another solid year for IEV as valuations remain notably lower even if we account for modest GDP growth.
European equities are rebounding in 2025, outperforming US stocks, driven by a stronger euro, increased defense spending, and pro-growth German policies. IEV and EZU are both strong ETF options for European exposure but differ in country allocations—EZU excludes the UK and Switzerland, focusing on the Eurozone. EZU offers higher weighting to Germany, more diversification, and a lower expense ratio compared to IEV, which has significant UK exposure and higher fees.
The iShares Europe ETF invests in large-cap European corporates primarily in the UK, France, Switzerland, and Germany. European equities offer an attractive earnings premium relative to the S&P 500 which more than offsets slower growth expectations. A number of political events in 2025 may provide a boost to earnings growth in 2026. Cheaper valuations and monetary policy normalization make the case for increased share repurchases.
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The company specializes in creating investment opportunities that offer exposure to the stock markets of Europe's foremost economies. It specifically measures the performance of leading companies located within Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. The cornerstone of its investment strategy lies in dedicating at least 80% of its assets towards either directly buying the stocks that comprise its underlying index or investing in financial instruments that mimic the economic characteristics of these stock. This strategy aims to provide investors with a diversified portfolio that captures the growth and stability of some of Europe’s most established markets.
This product offers investors a straightforward path to diversify their investment portfolio by gaining exposure to a broad range of companies across several European markets. By predominantly investing in the component securities of its underlying index, the fund mirrors the performance of notable firms within Austria, Belgium, Denmark, and other included countries, aiming to replicate the economic success of these securities.
In addition to direct investments in index component securities, the fund allocates a portion of its assets towards investments that possess economic characteristics substantially identical to those of its underlying index’s components. This includes derivative instruments or other financial products that are designed to mimic the performance of the index. This strategy enhances the fund's ability to stay closely aligned with the index performance, while possibly mitigating certain risks related to direct stock investments.