European stocks are hot right now.
The iShares Core MSCI Europe ETF (NYSEMKT: IEUR) has delivered total returns of about 12% year to date and 23% in the past year (as of July 31)
Based on Bloomberg research, there are a few reasons why European stocks are booming: – Better earnings: European companies in the Stoxx 600 index reported 17% earnings growth in the second quarter, the best in four years. – Lower oil prices: European countries mostly import their oil and gas, which made them vulnerable to higher prices from the Iran conflict. But oil prices have recently fallen, making Europe’s cost of doing business lower — and reducing European inflation. – Spread of the AI trade: Investors are looking beyond AI stocks and putting money into companies they believe will benefit from future productivity gains and AI profit boosts. European stocks can fit this strategy.
Europe is also home to major semiconductor stocks, such as the Netherlands’ ASML Holding. European stocks don’t always beat America. In the past 10 years, the S&P 500 has strongly outperformed the iShares Core MSCI Europe ETF — about 2 to 1.