EWU: UK Stocks Soaring In 2025, Decade-Plus Highs In Sight

The iShares MSCI United Kingdom ETF (EWU) is outperforming the S&P 500 in 2025, driven by strong momentum, reasonable valuation (P/E of 13.5), and a 3.5% dividend yield. The ETF's large-cap, financials-heavy portfolio is benefiting from a weaker US dollar, and technical analysis suggests further upside to the mid-$40s, leading to a reiterated buy rating.

Analysis

International equities have demonstrated a significant recovery in 2025, exemplified by the Vanguard FTSE All-World Ex-US ETF (VEU) achieving a 15% year-to-date return, inclusive of dividends. Within this trend, the iShares MSCI United Kingdom ETF (EWU) has notably outperformed the S&P 500. This outperformance is attributed to a confluence of strong momentum, a compelling valuation indicated by a P/E ratio of 13.5, and a robust shareholder yield evidenced by a 3.5% dividend yield. The EWU's portfolio, characterized by large-cap and financials-heavy constituents, is particularly well-positioned to benefit from a weakening US dollar. Furthermore, technical analysis suggests continued upward potential for EWU, with a bullish breakout targeting the mid-$40s, supporting the analyst's reiterated buy rating on the ETF. Despite rising global valuations, EWU's current metrics and robust liquidity maintain its attractiveness.

Key Decisions for Investors

• Investors may consider the iShares MSCI United Kingdom ETF (EWU) as an attractive vehicle for international diversification, given its strong recent performance, reasonable P/E of 13.5, and a notable 3.5% dividend yield.
• The ETF's financials-heavy, large-cap composition could offer relative outperformance if cyclical and defensive stocks lead, or if the US dollar continues to weaken, making it a strategic consideration for portfolios sensitive to these macroeconomic factors.
• With technical indicators pointing towards further upside to the mid-$40s and a reiterated buy rating, investors might view current levels as a potential entry point, while monitoring broader market conditions and currency movements.