EUFN: European Financials Remain Attractively Valued Ahead Of Potential Rate Hikes

The iShares MSCI Europe Financials ETF (EUFN) has outperformed broad U.S. financials ETFs so far in 2026, although the financials sector in general has lagged the S&P 500. EUFN returns come against the backdrop of positive but weak GDP growth for Europe in 2026, which nevertheless may allow central banks to hike rates to combat inflation. While core inflation dynamics point to a short-lived boost from higher interest rates, EUFN holdings benefit from additional medium and long-term catalysts.