US investors pour $11bn into European ETFs

US investors poured a record $10.6bn into exchange traded funds focused on European stocks in the first quarter, seven times the inflows recorded a year earlier, according to data from BlackRock.

As US President Donald Trump’s tariffs and economic policies fuel uncertainty across markets, European equities have emerged as a bright spot. Tim Seymour, founder and chief investment officer of Seymour Asset Management, dubbed the burgeoning trend Make Europe Great Again, or MEGA.

The resurgent interest in European ETFs reflects a sharp reversal in sentiment. Since Russia’s invasion of Ukraine in February 2022, the funds had seen net outflows of $6.4bn.

“It’s a really massive swing,” said Kristy Akullian, head of iShares Investment Strategy at BlackRock.

In three of the past five calendar years, investors steered money out of European ETFs that trade in US markets and into domestic funds, especially dominant technology stocks such as Nvidia, whose valuations remain elevated.

“It’s not that anyone is going to dump all their US stocks, but they’re rediscovering international stocks, and Europe in particular, for the first time in more than a decade,” said Seymour, who is also a portfolio manager of the Amplify International Enhanced Dividend ETF.

The breakout for Europe is different from others in recent years, he said.

“Europe is deregulating at a faster clip than the US is, the German fiscal announcements were historic,” Seymour said, citing the massive spending plans of Friedrich Merz, leader of Germany’s conservatives and its likely future chancellor.

Akullian said the iShares MSCI Germany ETF has seen more than $1bn of net inflows so far this year, doubling the fund’s total assets under management. That marked a record for the 29-year-old ETF, she said.

Defence stocks in particular have drawn investor interest this year, given calls by European leaders for boosting their militaries. The Select Stoxx Europe Aerospace & Defense ETF has attracted $469m in assets this year, bringing total assets to $476m, after it launched last October.

“There is quite a bit of genuine enthusiasm around what’s happening in Europe,” said Ronald Temple, chief market strategist for Lazard’s financial advisory and asset management businesses. US policy moves may have “jolted Europe out of its paralysis”, he said.

Some warned the rally may run out of steam.

“For this to be more than just a tactical trade we need to see follow through for earnings growth in Europe to really pick up,” said Akullian.

Not all European countries are benefiting from the optimism. ETFs that invest in British stocks, such as the iShares MSCI UK, continue to see net outflows.

Reuters