iShares MSCI Europe Small-Cap ETF Price & Performance (IEUS)

European equity ETFs have surged ahead of U.S. counterparts, outperforming by over 10% since January. Factors include increased European defense spending and a rebound in Chinese demand boosting exports. Meanwhile, U.S. equity ETFs face headwinds from high valuations and geopolitical uncertainties, leading to a notable shift in investor sentiment.12

January saw record-breaking inflows of $32.9 billion into European-listed ETFs, fueled by all-time highs in major indices like the S&P 500 and STOXX Europe 600. Optimism among fund managers suggests European equities may continue to rally, with expectations of further growth in ETF assets.32

Income-focused investors are gravitating toward high-yield ETFs like iShares $ TIPS 0-5 and WisdomTree Europe SmallCap Dividend. Offering yields above 4%, these ETFs balance income generation with diversification, providing a hedge against market volatility while avoiding pitfalls like dividend traps in individual stocks.45