The German Economy is Struggling: Should You Avoid This ETF?

Germany, which boasts the largest economy in the euro-zone, is facing major hurdles as we look ahead to the second half of 2019. In April, industrial production fell by 1.9% and exports fell 0.5% year over year.

The Bundesbank is now projecting growth of just 0.6% for 2019, which is a sharp adjustment down from the 1.6% it forecast in December 2018.

The tenuous global trade environment is especially damaging for Germany’s export-driven economy. Slower growth in China is weighing on German industry. The Bundesbank has said that trade disputes are increasingly weighing on global commerce.

The iShares MSCI Germany ETF (NYSE:EWG) seeks exposure to large and mid-sized companies in Germany. Shares of the ETF were up 2.64% in early afternoon trading on June 17.

The ETF has climbed 10% in 2019 in the face of broader struggles for the German economy. However, it has failed to recoup the 22% loss it incurred in 2018.

Some of the top holdings in the ETF include the information technology giant SAP, the multinational financial services company Allianz, and the industrial giant Siemens. German economic growth is expected to increase to 1.5% in 2020.

European Central Bank President Mario Draghi has said that the chances of a recession in the euro-zone are low as it has maintained a soft rate outlook.

The run up in this ETF has slowed over the past three months. Investors looking to buy-low should exercise patience and await a more favourable entry point in the summer.