ETF Edge

'You need to own Europe' despite weak manufacturing data, says investment pro

Eurozone sends slowdown signals—here are the best ETFs for playing through the pain
Eurozone sends slowdown signals—best ETFs for playing through the pain

Don't just vacation in Europe.

Investing in Europe should be the main focus for Wall Street, experts in the exchange-traded fund realm said Monday after weak manufacturing data out of the euro zone stoked worries of an accelerating economic slowdown overseas.

"Absolutely, you need to own Europe," Armando Senra, head of U.S., Canada and Latin America iShares at BlackRock, said on CNBC's "ETF Edge." "You have to be diversified."

Senra echoed BlackRock's recommendation to add euro zone exposure via the iShares MSCI Eurozone ETF, ticker EZU, a 250-stock fund with its biggest weightings in the stocks of energy company Total SA, information technology play SAP and retail giant LVMH.

While others agreed in the value of having some exposure to European equities, they didn't all believe EZU was the best way to achieve it.

"I do think you want to dip your toes into international markets," John Davi, founder and chief investment officer of Astoria Portfolio Advisors, said in the same "ETF Edge" interview.

"I do think you want to own some Europe, because the valuation spread of Europe versus U.S. is at multidecade highs," Davi said.

Astoria uses the WisdomTree International Hedged Quality Dividend Growth Fund, ticker IHDG, for European exposure, Davi said, adding that it provides a solid, "high-quality" complement to the U.S.-based WisdomTree U.S. Quality Dividend Growth Fund, ticker DGRW, in which his firm also invests.

Europe slowdown hits ETFs, here's how to trade
Europe slowdown hits ETFs, here's how to trade

"If you look at the IHDG, they tend to strip out a lot of the financials, so it's the higher-quality stocks within Europe" that don't carry the same risk profiles as the broader European indices, Davi said.

Alfred Eskandar, co-founder, president and chief operating officer at Salt Financial, said investors have to make a call on what's going to happen in the euro zone before buying in.

"If you look at the European markets, [they're] decentralized. You've got different political issues in each region. Certainly, Brexit for the last year and a half has not helped build any confidence [or] consensus," Eskandar said in the same "ETF Edge" interview.

"When you're looking at Europe, you've got to look at it in two ways: One is do you believe that there's going to be some [quantitative easing] out of the [European Central Bank], and if so, then you're going to need something that's currency-hedged," he said. "If not, then you're going to want to look for broad regional or even specific-country exposure."

Nevertheless, the U.S. stock market is still Eskandar's preference.

"I don't see anything in the near future" that would signal a turnaround in Europe, he said. "There's just way more uncertainty and a fragmented market. I think the U.S. continues to be a much safer play."

U.S. stocks swung Tuesday amid rising worries that Democratic lawmakers were getting closer to beginning impeachment proceedings against President Donald Trump. European stocks closed slightly lower.