FEZ Smashed VOO With 2x The Return, Is It Just Warming Up?

At a year-to-date return of 17.67%, the Vanguard S&P 500 ETF (NYSE: VOO | VOO Price Prediction) is demonstrating the strength of the US market, with SPDR S&P 500 ETF (NYSE: SPY) hot on its heels at 17.56%. President Trump’s pro-business oriented revival of the US economy has led to over $18 trillion in US investments, a stronger dollar, and a reversal of the Bidenomics-fueled double digit inflation experienced in the US over the previous 4 years. 

Ironically, it might very well be the results of some of these policies that has led to European stock market growth. The SPDR EURO STOXX 50 ETF (NYSE: FEZ) is presently delivering a 35.05% return year-to-date, practically double that of VOO or SPY.  FEZ contains a panoply of well known, multinational companies based out of Europe. Although European economies, by and large, have lagged behind the US and China, its index stocks’ successes are due to a combination of their smaller range of competition in different sectors, as well as policies that have made the US stronger that have made European companies viewed as discounted with greater potential upside than US companies that already may be overbought.

SPDR EURO STOXX 50 ETF

FEZ tracks the EURO STOXX 50 Index, which represents the largest cap companies across 20 EURO STOXX Super sector indexes.

Europe has some 30 different stock markets among its various European Union members, along with the UK and Scandinavia. Out of the 20 Euro STOXX Super sector indexes, the EURO STOXX 50 represents the largest Eurozone companies by market cap across the various EURO STOXX Super sector Indexes and encompasses roughly 60% of the EURO STOXX Total Market Index.  The STOXX EURO 50 is a separate index that includes Scandinavia and the UK.

FEZ was designed to track the EURO STOXX 50 Index. An overview of FEZ is as follows:

Top 10 largest FEZ holdings are:

• ASML Holding – 9.0%
• SAP SE – 5.13%
• Siemens AG – 4.22%
• LVMH Moet Hennessey Louis Vuitton – 3.74%
• Allianz SE – 3.53%
• Banco Santander SA – 3.40%
• Schneider Electric SE – 3.24%
• Totalenergies SE – 3.09%
• Airbus SE – 2.76%
• Safran SA – 2.65%

Is the EURO STOXX 50 Undervalued or Is the S&P 500 Overvalued?

There are a number of reasons why FEZ is outperforming VOO and SPY at present, and some of them have to do directly with the huge bull run of the S&P 500 itself. However below are three (3) for consideration:

S&P 500 Magnificent 7 Overreliance:

It’s well known that more than half of the huge gain achieved by the S&P 500 are the result of the AI technology boost delivered by multi trillion dollar valuations of Magnificent 7 stocks, which include Apple, Amazon, Alphabet/Google, Microsoft, Meta Platforms/Facebook, Nvidia, and Tesla. This has caused, what many analysts have both stated and fear, that an AI bubble is now driving the index, and the overvaluations may well result in a correction comparable to that of the dotcom bubble collapse. 

A Slow Federal Reserve Rate Cut:

In what can only be interpreted objectively as a politically motivated partisan stance, Federal Reserve Chairman Jerome Powell foolishly cut interest rates during the inflation of the Biden era, adding jet fuel to a bonfire that sent inflation into double-digits. Conversely, despite the economic revival led by the Trump Administration and Treasury Secretary Scott Bessent, Powell stubbornly refused to cut rates, leaving the US as the lone nation to keep higher interest rates when the entirety of the industrialized world’s central banks had done so many months before. European markets thus had a sizable head start over the US for its constituent companies, many of whom face less domestic competition in their host nations.

Diversification Risk Mitigation:

Unlike the AI heavy weighted S&P 500, the EURO STOXX 50 has a mix of technology, retail, insurance, banking, and transportation sectors represented in its top 10. Especially with the volatility in today’s markets, investors seeking to offset risk are looking towards diversifying their portfolios not only geographically, but in terms of industrial sectors.

While FEZ has certainly had a good run in 2025 so far, there are indications that it can build on its present trajectory if it can keep geopolitical conflicts to a minimum and manage its policies to open more competition. The current risk of large entities having near monopolistic control over certain sectors will not serve it too well over the long haul.