Prediction: SPDR's Euro ETF Is Just Heating Up

"The biggest factor propelling FEZ higher is the European Central Bank's dovish monetary policy. Prediction markets assign a 98% probability the ECB will cut rates by at least 25 basis points at its February 2026 meeting. Lower rates boost equity valuations by reducing discount rates and stimulating economic activity. For European stocks, which have historically traded at lower multiples than U.S. counterparts, this has contributed to valuation expansion."

"FEZ's performance isn't just about macro tailwinds. The fund's concentrated exposure to 50 large-cap European companies includes genuine global leaders. ASML Holding ( NASDAQ:ASML), the fund's largest position at 8.4%, dominates the extreme ultraviolet lithography market critical for advanced semiconductor manufacturing. The company posted a 53.8% return on equity with profit margins near 29%, and Wall Street analysts maintain 73% buy-side ratings."

European equities have begun outperforming the S&P 500 after a decade of trailing, with the SPDR Euro STOXX 50 ETF (FEZ) showing strong momentum. Prediction markets put a 98% chance of at least a 25 basis point ECB rate cut by February 2026, and lower rates typically raise equity valuations by reducing discount rates and stimulating activity. ECB deposit facility rate sits near 2% and policy announcements occur roughly every six weeks. Europe's softer inflation gives the ECB more room to ease compared with the Fed. FEZ's concentrated exposure to 50 large-cap companies includes leaders like ASML, which displays high ROE and margins that support performance.

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