Europe Stock Watch: Tariff Crisis Will Lead to Opportunity

There’s a new crisis in Europe. And it could lead to big profits if you can get past the fear, uncertainty, and doubt (FUD) being drummed up by financial media.

Investors are reacting to President Trump’s threat to impose tariffs on eight European countries opposed to the proposed U.S. takeover of Greenland.

According to the BBC, “Trump announced a 10% tariff on goods from Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands and Finland would come into force on 1 February, but could later rise to 25% – and would last until a deal on Greenland was reached.”

President Trump has also threatened a 200% tariff on French wines and champagne, citing reports that President Emmanuel Macron does not want to join Trump’s Board of Peace.

Short-Term Shock, Long-Term Setup

Unsurprisingly, shares of luxury and beverage companies tied closely to European exports have pulled back. LVMH (OTCMKTS: LVMUY), which owns iconic brands such as Moët & Chandon, Dom Pérignon, and Veuve Clicquot, dropped roughly $7.50 on the news.

Shares of Rémy Cointreau (OTCMKTS: REMYY) have also experienced a modest decline. Shares are down nearly 5% in the five trading days ending Jan. 20.

However, these pullbacks appear driven more by headline risk.

Global demand for premium spirits, luxury goods, and iconic brands remains resilient, particularly among high-income consumers who are less sensitive to short-term price increases. If — as many expect — the tariff standoff proves temporary, today’s weakness could represent a buy-the-dip opportunity for patient, long-term investors.

However, as noted above, many European stocks trade on the over-the-counter (OTC) markets, and many don’t provide investors with the same level of information that they can get about U.S. stocks.

A better option if you want broader exposure to European stocks may be exchange-traded funds (ETFs). Here are three examples that offer intriguing setups.

The Vanguard FTSE Europe ETF (VGK)

The Vanguard FTSE Europe ETF (NYSEARCA: VGK) is down just over 1% in the five days ending Jan. 20. Most of that has come on the tariff news. But with expectations that the tariff crisis will be short-lived, we can use the slight pullback as a buy opportunity. 

With an expense ratio of 0.06%, the VGK ETF tracks the FTSE Developed Europe All Cap Index, which measures the investment return of stocks located in the major markets of Europe, including Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.

The ETF also pays a quarterly dividend. Its last one for just over 77 cents was paid on December 23. Before that, it paid a dividend of just over 20 cents on September 23.

iShares Europe ETF (IEV)

The iShares Europe ETF (NYSEARCA: IEV) is also down slightly on the tariff threat, about 1.28%. However, like the VGK, unless the tariff threats become real, the IEV ETF should see a healthy bounce back.

With an expense ratio of 0.6%, the IEV ETF tracks a broad range of European stocks, including ASML Holding (NASDAQ: ASML), Roche Holding (OTCMKTS: RHHVF), HSBC Holdings (NYSE: HSBC), Novartis (NYSE: NVS), and Nestle (OTCMKTS: NSRGY), to name a few of its 363 current holdings. It also pays a dividend twice a year. Its last payment, just over 75 cents, was made on December 19. Before that, it paid out a dividend of just over $1.12 on June 20.

The SPDR Portfolio Europe ETF (SPEU)

Continuing with the theme, the SPDR Portfolio Europe ETF (NYSEARCA: SPEU) is down about 1.1% in the five days ending Jan. 20.

With an expense ratio of 0.07%, the SPEU ETF tracks the total return performance of the STOXX Europe Total Market Index. It holds 1,766 stocks, including ASML Holding, Roche Holding, HSBC Holding, Nestle, SAP (NYSE: SAP), and Novo Nordisk. It also pays a dividend that currently yields 2.41%.

Turn Noise Into Opportunity

If history is any guide, trade disputes tend to fade faster than markets initially fear. For disciplined investors with a long-term horizon, the current pullback in European equities may prove to be a significant opportunity.