First Trust IPOX Europe Equity Opportunities ETF

FPXE

Market cap $4.68M

Europe's macro outlook is shifting. After years of fiscal restraint and fragmented policy, the region is entering a new chapter - one centered on pro-growth fiscal policy, energy security, and capital-market reform.

For investors looking for income through a multi-asset class approach, it might seem sensible to max out the dividend yield within the equity allocation. Yield-focused equity strategies may introduce regional and sector concentrations that can influence returns. Given the relatively attractive yields available in other asset classes, we think it makes more sense to design 'core-like' equity exposure within multi-asset income solutions.

French bond yields have risen significantly against German bunds and are likely to stay elevated or potentially move higher. The European Central Bank still appears to be a reliable backstop against excessive bond turmoil.

Plans to increase defense and infrastructure spending offer compelling economic benefits for Germany's lagging manufacturing sector. The US seems to be dramatically reducing spending through its Department of Government Efficiency (DOGE) effort.

Absolute Return Partners is a London-based investment advisory business. Founded by Niels Jensen in 2002, it focuses on providing bespoke alternative investment solutions to institutional investors.

The ECB cut rates by 25bp as widely anticipated, but a slightly hawkish tilt bear flattened the EUR curve, which in our view remains priced aggressively. In the US, as the markets head towards the Fed's first rate cut, the probability of a larger cut rose slightly on Thursday.

Former ECB President Mario Draghi's 400 pages of economists' ‘greatest hits' and a few more controversial proposals provide Europe's most comprehensive plan yet to revive its economy, decarbonise and become more self-sufficient. Economic growth in Europe has been weak compared to the US and China for a long time, but the sense of urgency around economic reform outside of crises was lacking.

The drop in eurozone inflation from 2.6 to 2.2% was mainly because of energy inflation but does confirm the view that the inflation environment is slowly getting more benign. The ECB has arrived on a long home straight when it comes to bringing inflation back to target.

The composite PMI increased from 50.2 to 51.2 from July to August, mainly due to a jump in French services activity. Meanwhile, eurozone manufacturing continues to be a big disappointment.

Eurozone GDP growth in the second quarter beat expectations and maintains the growth pace of 0.3% quarter-on-quarter seen in the first quarter. With unemployment low and inflation more benign, the economy is undoubtedly in a better situation than it was, for example, a year ago.