18/03/25 13:00:58

ETFs: Preferably “ex USA”

European equities have left US equities behind, and in the ETF market everything is moving in the direction of the Euro Stoxx, Stoxx Europe or DAX. The US-heavy MSCI World ETFs are being avoided - and the focus is instead on the MSCI World ex USA.


18. March 2025 FRANKFURT ( Börse Frankfurt). European equities top, US equities flop - this trend can also be seen in the ETF market. The US and World ETFs that have been favorites for many years are suddenly unpopular, while Euro Stoxx, Stoxx Europe and DAX trackers are extremely sought-after. Those who still want to invest in world equities are now opting for variants with a low or no US component. “Overall, we once again had slightly more sales than purchases as turnover slowed,” reports Holger Heinrich from Baader Bank. “Last week we saw a lot of selling of US equities, but the picture is more balanced at the end of the week and the beginning of this week,” notes Moritz Kretschmann from Lang & Schwarz.

The DAX rose to a new record high of 23,482 points today (Tuesday) - driven by the expected easing of the debt brake and the billions invested in armaments and infrastructure in Germany. Although US equities have recently recovered somewhat, they are still well below their highs - the Dow Jones is down by more than 7 percent and the Nasdaq 100 by 11 percent. 

Europe remains the favorite

European equities therefore remain popular - both large and small caps, including ESG variants. For example, the iShares Euro Stoxx 50 ESG (IE000LXEN6X4), as Heinrich observes, as well as the Deka MSCI Europe (DE000ETFL292) and the BNP Paribas Easy MSCI Europe Small Caps SRI S-Series PAB 5% Capped (LU1291101555). Outflows from some UK-related ETFs, such as the FTSE 100 and FSE 250 ETFs (IE00BKX55Q28) and the iShares UK Dividend (IE00B0M63060), were also noticeable. “European equities are in demand, including DAX trackers,” reports Kretschmann.

US equities, on the other hand, are on the sell list. “In the case of US ETFs, it is mainly the major indices that are being sold,” reports Heinrich. Classic S&P 500 and MSCI USA trackers (IE00BM67HW99, IE000UMV0L21) are affected, but also equally weighted and the “Score & Screened” variants of the S&P 500 (IE00BHXMHQ65) equipped with ESG filters. 

“Without variant” beats classic MSCI World

Among the World ETFs, products with a low or no US equity component are currently doing well, as Heinrich notes. Examples include the Xtrackers MSCI World ex USA (IE000Z0FC0G5) and the Invesco FTSE RAFI All World 3000 (IE00B23LNQ02). The MSCI World ex USA tracks developed market equities but excludes US equities. At the end of February, Japanese equities accounted for the largest share at 19 percent, followed by British (13 percent), Canadian (11 percent), French (10 percent) and Swiss (9 percent.) The largest positions were Novo Nordisk, SAP, ASML, Nestlé and Astrazeneca. Since the beginning of the year, the index has outperformed the “normal” MSCI World (2.8 percent) with a gain of 6.9 percent (to the end of February), but the classic version is still ahead over one and three years. 

The period of high inflows into US equities is over. 

Inflows into the ETF market in Europe continued in February. “At 30.5 billion euros, new investments in the short month of February remained almost twice as high as the three-year monthly average,” reports the ETF analysis and trading company Crossflow. The pressure to invest is therefore not abating. Crossflow reports an inflow of over 20 billion euros on the equity side for the fourth month in a row. On the bond side, it was even the highest volume for six months. Also striking: for the first time in exactly two years, ETFs on US equity indices did not receive any further net money, but even recorded slight outflows. “This is remarkable insofar as no less than 42 percent of new investments on the equity side in the past three years flowed into ETFs with US indices and 49 percent into products with global indices,” it says. 

Focus on Europe's defense companies

While the long-popular tech ETFs continue to be sold off, defense index funds are in demand. Examples include VanEck Defense (IE000YYE6WK5) and Global X Defence Tech (IE000JCW3DZ3). According to Kretschmann, the new WisdomTree Europe Defence (IE0002Y8CX98), which focuses on European defense companies, has also been very well received. The current heavyweights are Rheinmetall, Leonardo, Saab, BAE System, Thales, Rolls-Royce and Airbus.

High gold price stimulates demand for ETCs

While trading in crypto-ETNs is currently rather quiet, according to Kretschmann, there is a lot going on in the gold ETC business. The price of gold recently climbed to a new high of 3,028 US dollars, and on Tuesday lunchtime it is hardly less. Xetra-Gold (DE000A0S9GB0), for example, is popular. “However, demand extends to many gold ETCs,” reports the Lang & Schwarz trader.

By Anna-Maria Borse, 18. March 2025, © Deutsche Börse AG

Anna-Maria Borse is a financial and business editor specializing in the financial market/stock exchange and economic topics.

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