Three of Europe’s top economies are on the verge of recession in late October. The United Kingdom, Germany, and Italy are all suffering from unique and troubling economic headwinds.
The U.K. is still wrestling with the Brexit crisis, Germany’s manufacturing sector is in decline, and Italy is suffering from weak productivity, high unemployment, huge debt, and continuing political turmoil.
To make matters worse, the International Monetary Fund (IMF) trimmed its global growth forecasts for 2020 by 0.1% to 3.4% earlier this month. Brexit and the European Union have agreed on a Brexit delay to January 31, 2020, which will likely prove a shock to the Eurozone to start the decade.
The iShares MSCI Eurozone ETF (NYSE:EZU) seeks exposure to developed market countries using the euro, and convenient access to a broad range of eurozone stocks. This means that we will be avoiding the drama in the U.K. with this ETF.
Shares of this ETF have climbed 18.2% in 2019 after a 16% decline in 2018.
Some of the top holdings in this ETF include Germany-based SAP, the French oil and gas giant Total SA, and the Dutch semiconductor company ASML Holding. However, each of these stocks boast less than 3% weighting. The ETF is nicely diversified, which may be a good or bad thing as we track Europe into 2020.
Investors should expect some friction as we move into the New Year. Germany has failed to break out of its economic funk, and if it falls into recession investors may want to exercise patience and wait for better price levels in this ETF.
