Gotrade News - The iShares MSCI Europe Financials ETF (EUFN) returned 25.20% over the past year, dramatically outpacing the SPDR Financial Select Sector ETF (XLF) at 2.20%. The gap reframes how investors approach financial sector exposure heading into the second half of 2026.
According to The Motley Fool, European banks entered 2026 with cheaper valuations and benefited from rising defense spending and a stronger euro. US financials, by contrast, faced tariff and deregulation uncertainty that pressured returns through the period.
Key Takeaways
- EUFN returned 25.20% over the past year versus 2.20% for XLF, an 11x performance gap.
- EUFN carries higher tail risk with a 35.20% five-year max drawdown and a 0.48% expense ratio.
- REX Shares launched 2x leveraged single-stock ETFs on AST SpaceMobile and Lumentum on May 27, 2026.
Why European Financials Are Leading
European banks have benefited from a structural backdrop that US peers lacked through 2026. Rising defense spending, fiscal stimulus, and a stronger euro lifted earnings power across the region's largest lenders.
US financials in Financial Select Sector SPDR (XLF) faced tariff overhang and uncertain deregulation timelines. The Motley Fool notes that cheaper entry valuations in Europe amplified the relative return on offer to US investors.
The performance premium does carry costs. EUFN's 0.48% expense ratio is six times higher than XLF's 0.08%, requiring sustained outperformance to justify the spread.
Currency exposure adds another layer. A weakening dollar would extend the rally, while euro reversal could erode gains for US-based holders without a hedge.
Regional Banks and a Space ETF Wildcard
Investors weighing US bank exposure face a separate strategy choice between regional and megabank ETFs. As reported by The Motley Fool, iShares U.S. Regional Banks ETF (IAT) targets community lenders at 0.38% with a 2.80% dividend yield.
IAT holds 31 stocks led by PNC Financial, US Bancorp, and Truist Financial. First Trust Nasdaq Bank ETF (FTXO) charges 0.60% and tilts toward JPMorgan Chase, Bank of America, and Citigroup, earning fee income from investment banking and trading.
Over five years, FTXO turned $1,000 into $1,311 while IAT experienced less severe drawdowns. The choice maps to whether the investor prefers regional steady income or megabank revenue diversification.
Per InvestmentNews, REX Shares and Tuttle Capital launched two 2x leveraged single-stock ETFs on May 27, 2026. The T-REX 2X Long ASTS (ASUP) and T-REX 2X Long LITE (LITE) target space connectivity and AI optical infrastructure traders.
Both funds aim to deliver 200% of daily performance of their underlying single stocks. The launches extend a broader retail trend of leveraged single-stock product issuance that has accelerated since 2020.
