Investor sentiments, as gauged by exchange-traded fund movements, show increased interest in global and European funds. About $63 billion and $24 billion in net assets moved into each equity group, respectively, in 2017 through Aug. 31. U.K. ETFs saw interest wane for most of the year, losing about $267 million in net assets despite a near 15% year-to-date return of the MSCI U.K. index.
Among the key factors attracting money to Europe has been improved relative valuations as earnings growth has outpaced price growth, pushing price-earnings ratios lower. U.S. equities, approximated by the S&P 500 index, have seen P/Es rise throughout the year even as the index has hit several record highs.
To keep perspective, U.S. large-cap equity ETFs outsize global-, Europe- and U.K.- focused ETFs by about $275 billion, and U.S. equity ETFs are still the elephant in the room. State Street’s SPDR S&P 500 ETF has about $75 billion more in total assets than all large-cap European equity focused ETFs and only about $88 billion shy of all global large-cap funds. Nonetheless, data show that general sentiments are favoring global equities over U.S. equities.