For Europe ETFs, Unemployment Rates Don't Mean Much


At least not in 2013. The eurozone is contending with a jobless rate of around 12 percent, but when it comes to country-specific ETFs tracking European nations (both eurozone members and those that are not), the returns are not always tightly correlated to a country's employment picture.

This is something of a departure from what has been seen in other parts of the world. For example, Egypt and South Africa are home to dismal rates of unemployment. In 2013, the Market Vectors Egypt ETF (NYSE:EGPT) and the iShares MSCI South Africa Index Fund (NYSE:EZA) have struggled, performing worse than major diversified emerging markets ETFs such as the iShares MSCI Emerging Markets Index Fund (NYSE:EEM).

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In Europe, however, a rosy jobs picture is not always a guarantee of stellar ETF returns. Likewise, some ETFs tracking nations with rancid employment situations have not been as bad some investors may have imagined at the start of the year.

Upper Crust Just two Eurozone members, Austria and Germany, have unemployment rates below six percent, according to Stratfor data. In fact, Austria's jobless rate is below five percent at 4.7 percent.

That statistic has been of little help to the iShares MSCI Austria Capped Investable Market Index Fund (NYSE:EWO), which has traded slightly lower this year. Germany, the eurozone's largest economy, has a jobless rate of 5.4 percent. Obviously, that is much worse than Austria's, but still excellent, regionally speaking. The iShares MSCI Germany Index Fund (NYSE:EWG) is up nearly seven percent year-to-date.

Bottom Feeders When it comes to European nations that are investable via ETFs that also have terrible unemployment situations, Greece and Spain take the cake. As the Stratfor data indicate, the average unemployment rate between the two PIIGS members is nearly 27 percent.

Investors have not been bothered by that this year as the iShares MSCI Spain Capped Index Fund (NYSE:EWP) and the Global X FTSE Greece 20 ETF (NYSE:GREK) are each up almost six percent. GREK's performance is all the more impressive when considering Greece has had to deal with the situation in Cyprus and a demotion to emerging markets status by one major index provider.

In The Middle There are 11 European nations with jobless rates ranging from six percent to 10 percent and six are accessible through country-specific ETFs. That list is comprised of the Netherlands (6.4 percent unemployment), Denmark (7.2 percent), the U.K. (7.8 percent), Belgium (8.2 percent), Finland (8.2 percent) and Sweden (8.4 percent).

That is an average of 7.7 percent. The average return for a group of ETFs comprised of iShares MSCI Netherlands Investable Market Index Fund (NYSE:EWM), iShares MSCI Denmark Capped Investable Market Index Fund (BATS: EDEN), iShares MSCI Belgium Capped Investable Market Index Fund (NYSE:EWK), iShares MSCI U.K. Index Fund (NYSE:EWU), iShares MSCI Sweden Index Fund (NYSE:EWD) and the iShares MSCI Finland Capped Investable Market Index Fund (NYSE:EFNL) is just over 9.2 percent.

The worst performer of this group is EWN with a year-to-date gain of 6.3 percent. The best is EDEN, which is up over 13 percent. Danish equities have benefited from Denmark's negative interest rates and AAA credit rating.

Not Good, Not Bad In normal circumstances, an unemployment rate of 11 percent would be considered bad, but hey, this is Europe so 11 percent is better than average. At least that is what France and Italy, the eurozone's second- and third-largest economies can say. France's jobless rate is 11 percent and Italy's is 11.5 percent, according to Stratfor.

In terms of ETF returns, the iShares MSCI Italy Index Fund (NYSE:EWI) is barely higher this year, but it is not in the red, either. The iShares MSCI France Index Fund (NYSE:EWQ) is up 7.1 percent. Also laboring in the 10 percent to 20 percent rate of joblessness in Europe is Ireland at 14.1 percent. Clearly, the iShares MSCI Ireland Capped Investable Market Index Fund (NYSE:EIRL) has had the luck of the Irish on its side because the ETF has surged 14.3 percent this year.

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