IEUR - EWU: Time For Caution After A Blistering U.K. Rally
2024-05-21 15:41:38 ET
Summary
- After years of underwhelming returns, EWU has surged in recent months.
- While the macro justifies this move to some extent, the micro has yet to catch up.
- Despite its income appeal, EWU seems too pricey at current levels.
As I highlighted in my prior coverage of iShares MSCI United Kingdom ETF ( EWU ) (see EWU: Undervalued Defensiveness ), U.K. large-caps have traditionally been a great defensive choice to ride the global cycles. The recent rally changes this algorithm somewhat, given it has come at the expense of a few additional turns to the P/E multiple. To be fair, the rally has some solid fundamental roots, from a cyclical upswing in commodity prices (note that EWU is heavy on producers) to the prospect of interest rate cuts (ahead of the US/EU) by an increasingly dovish Bank of England....
EWU: Time For Caution After A Blistering U.K. Rally