ETF Talk

ETF Talk: Betting on the Iron Chancellor

With the European Union considering a third bailout of Greece and most of its member nations struggling with sluggish growth and crushing debt, one country has done significantly better than its neighbors. Germany has grown its economy under Chancellor Angela Merkel, while many other European economies have faltered. Known by her supporters as the “Iron Chancellor,” Merkel gives investors hope for political stability in that country. One way to invest in Germany is through the iShares MSCI Germany Index (EWG), an exchange-traded fund (ETF) that holds a wide cross-section of German companies.

Major holdings in EWG include insurers, software companies and carmakers, such as Volkswagen (VOW3.DE). Not only are those sectors doing reasonably well, but the fund could be helped by the upcoming national German election. With Merkel’s Christian Democrats now leading in the polls only a month before the election, investors should be able to avoid Germany’s economic recovery from careening off course due to the uncertainty that a new leader might bring. During the past year, the German DAX Composite Index has rallied 19% — a favorable sign for the country’s economy and the politicians currently in power.

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