The S&P 500 logged its worst year since 2008, mainly due to mounting inflation and rising rate worries. The key U.S. equity gauge lost about 20% in 2022. The Fed rate hikes took the benchmark rate to the range of 4.25% to 4.5%, its highest level in 15 years in December (read: Top-Ranked ETFs to Play Fed’s Seventh Rate Hike of 2022).
The policymakers also forecast that their key short-term rate will reach a range of 5.1% by the end of 2023, before being slashed to 4.1% in 2024. This suggests that the Fed is prepared to hike its benchmark rate by additional three-quarters of a point and then stay put until the end of 2023.
This, along with geopolitical tensions and commodity price rally, resulted in the Wall Street crash. Global markets, too, slumped in 2022. But some European country ETFs outperformed the S&P 500 in 2022. This happened despite the fact that the European Central Bank hiked rates last year, though the quantum of ECB rate hikes was smaller than that of the Federal Reserve.
Below we have highlighted a few winning European country ETFs of 2022.
ETFs in Focus
iShares MSCI Turkey ETF TUR – Up 98.7%
The Borsa Istanbul 100 index continued hitting record highs in 2022, as investors kept on using equities as a hedge against surging consumer prices and a plunging lira. The Central Bank of Turkey paused the rate-cut cycle and left the one-week repo rate unchanged at 9% on Dec 22, following a 1000 bps cut since September 2021, per tradingeconomics.
iShares Currency Hedged MSCI United Kingdom ETF HEWU – Up 8.50%
The British economy shrank 0.3% sequentially in the third quarter of 2022, slightly more than the preliminary estimate of a 0.2% decline. The annual inflation rate in the United Kingdom eased to 10.7% in November of 2022 from 11.1% in October, which was the highest since October 1981. The figures came below market forecasts of 10.9%.
No wonder, the Bank of England hiked the benchmark rate by half a percentage point to 3.5%, the highest level in 14 years. It was the ninth successive increase since December 2021 and followed last month’s outsized three-quarter point rate hike, the biggest in 30 years.
Global X MSCI Greece ETF GREK – Up 6.8%
Though Greece’s economy contracted by 0.5% sequentially in the third quarter of 2022, this marked the first shrinkage since the second quarter of 2020, amid worsening global economic conditions. Greece’s consumer price inflation eased for two months in a row to 8.5% in November 2022, down from 9.1% in the previous period. The rate touched its lowest level since February.
Global X MSCI Portugal ETF PGAL – Down 3.7%
Portugal’s GDP expanded 0.4% sequentially in the third quarter of 2022, in line with preliminary estimates and accelerating from a muted 0.1% expansion in the previous period. On an annual basis, GDP increased 4.9%, easing from a 7.4% expansion in the previous quarter. The annual inflation rate in Portugal was expected to slow down to 9.6% in December of 2022, compared to 9.9% in November. Energy inflation is estimated to have fallen to 20.9%, while food costs are likely to have slowed down to 17.6%.
iShares MSCI Spain ETF EWP – Down 5.1%
The annual inflation rate in Spain dropped to 5.8% in December of 2022 from 6.8% in the previous month, the lowest since November 2021. Cooling inflation was a positive. The Spanish economy grew 4.4%, above preliminary estimates of 3.8% but down from an upwardly revised 7.6% expansion seen in the second quarter. The recovering tourism industry and EU fund inflows have been supporting the economy.
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