MW ETF investors appear hungry for international stocks despite looming tariffs

By Christine Idzelis

The SPDR Euro STOXX 50 ETF is crushing the S&P 500 so far in 2025

Dear loyal ETF Wrap readers,

Thank you for your interest in ETF Wrap, and for making it a part of your weekly reading over the years.

After March 27, MarketWatch will no longer publish the ETF Wrap newsletter. While this newsletter will end, MarketWatch will continue to bolster our core coverage of ETFs and other investing trends that affect your wallet, ensuring that you receive the sharpest insights and analysis every day from MarketWatch.

Find our world-class journalism and insights at MarketWatch.com, where our coverage of ETFs will be stronger and more focused than ever. To explore our variety of newsletter offerings covering how the news of the day impacts you and your money, visit MarketWatch's Newsletter Center.

We greatly appreciate your support and welcome any feedback you'd like to share about how we can better serve you. Please feel free to reach out to me directly with questions and concerns at mark@marketwatch.com.

Thank you again for being part of the MarketWatch community.

Warm regards,Mark DeCambreEditor in Chief, MarketWatch

***

Now, for your final ETF Wrap...

Amid the upheaval of shifting U.S. trade policy, exchange-traded-fund investors are turning to international stocks despite looming tariffs.

In recent trade developments, the White House on Wednesday evening announced tariffs of 25% on cars not made in the U.S. and some imported automotive parts. The U.S. will begin collecting the auto tariffs on April 3, the day after President Donald Trump plans to roll out his widely anticipated reciprocal tariffs.

Still, signs of strengthening investor demand for international stocks have emerged in the ETF market over the past month, as equities in areas such as Europe have rallied recently to outperform the U.S.. In part, European stocks seem to have responded favorably to increased defense spending on the continent.

European countries are under pressure as the U.S. appears to be "undoing its own global order," Ian Bremmer, founder and president of Eurasia Group and GZERO Media, said March 25 onstage at the Exchange conference in Las Vegas. "Europe is in serious trouble."

According to Bremmer, Europe is feeling threatened by Russian President Putin at the same time that its relationship with the U.S now appears damaged. Beyond tensions over tariffs, Bremmer pointed to Trump looking to cut a deal with Putin to end the Ukraine war without engaging Europe.

Yet U.S.-listed ETFs focused on total-market equities in developed Europe have seen $4.9 billion of inflows over the past month, including slightly more than $1 billion in the past week, according to FactSet data. That brought inflows for the category to around $6.4 billion so far in 2025 - a sharp contrast to outflows of $274 million seen over the past year.

Meanwhile, the SPDR Euro STOXX 50 ETF FEZ, which focuses on the 50 biggest companies in the eurozone, has surged 14.8% this year through Thursday. Investors have poured more than $600 million into the fund over the past month, which amounts to more than half of its total inflows of roughly $1.1 billion over the past year, according to FactSet data.

"Expectations of Europe's demise due to Russian aggression and American abandonment are grossly exaggerated," said Marko Papic, chief strategist at BCA Research, in a note this month.

"Investors should overweight European defense companies relative to global, particularly U.S., peers," he said. "More broadly, Europe can outperform U.S. markets throughout the rest of this decade."

Over the past month, investors have contributed about $4.2 billion to ETFs that target stocks globally but exclude the U.S., including $844 million in the past week, according to FactSet data. That brought this year's total to around $6.9 billion.

Earlier this month, the Vanguard Total International Stock ETF VXUS, which tracks an index of global stocks outside the U.S., saw its biggest weekly inflow since September, according to FactSet data. The fund, which has around $85 billion of assets under management, has gained 7.3% this year through Thursday.

The U.S. stock market is in the red so far in 2025, with the S&P 500 SPX down 3.2% through Thursday.

"Everyone is obsessed with Trump and his tariff wars," said Rob Arnott, chairman of Research Affiliates, in an interview on the sidelines of the Exchange conference in Las Vegas earlier this week. Despite anxiety over large tariffs having potential to hurt the economy, Arnott said he expects that they will ultimately be more moderate and only "lightly impede" trade.

As usual, here's your look at the top- and bottom-performing ETFs over the past week through Wednesday, according to FactSet data.

The good...

   Top performers                                                                                                                                                                  %Performance 
   YieldMax MSTR Option Income Strategy ETF                                                                                                                                        7.0 
   United States Oil Fund LP                                                                                                                                                       4.1 
   ARK Next Generation Internet ETF                                                                                                                                                3.8 
   YieldMax TSLA Option Income Strategy ETF                                                                                                                                        3.8 
   ARK Innovation ETF                                                                                                                                                              3.2 
   Source: FactSet data. Start date: March 19. End date: March 26. Excludes ETNs and leveraged products. Includes NYSE-, Nasdaq- and Cboe-traded ETFs of $500 million or greater. 

...and the bad

   Bottom performers                    %Performance 
   Invesco China Technology ETF         -7.5 
   KraneShares CSI China Internet ETF   -6.1 
   iShares MSCI China ETF               -5.7 
   iShares China Large-Cap ETF          -5.4 
   Invesco Solar ETF                    -5.2 
   Source: FactSet data 

New ETFs

-- Westwood Holdings Group said Thursday that it launched the Westwood LBRTY Global Equity ETF BFRE, which invests in stocks globally while "seeking to limit exposure to authoritarian regimes while maintaining broad market exposure."

-- Principal Asset Management announced on Thursday the launch of the Principal Capital Appreciation Select ETF LCAP, an actively managed fund that invests in U.S. equities.

Weekly ETF reads

-- The 'Squid Game' market: Risky leveraged ETFs boomed in 2024. Now comes the bust. (MarketWatch)

-- Trump Media's next move is to launch ETFs alongside a crypto partner (MarketWatch)

-- Hottest Emerging ETF Sees Record Outflows as China Gains (Bloomberg)

-- What's hot in ETFs? Bond funds are in demand as investors flee the Nasdaq 'QQQ' (CNBC)

-- Cliff Asness's AQR Slams Buffer-ETF Boom on 'Investment Failure' (Bloomberg)

-Christine Idzelis

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

March 27, 2025 18:59 ET (22:59 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.