HEDJ vs. S&P 500: Why European Exporters Outperform in a High-Valuation U.S. Market

The U.S. stock market has been on a tear, but behind the headlines lies a stark truth: many growth stocks are overvalued to the point of recklessness. Meanwhile, European exporters—harnessed in the WisdomTree Europe Hedged Equity ETF (HEDJ)—are trading at a valuation discount, offering a safer, smarter way to play global growth. Let's break down why HEDJ is a contrarian winner in this environment.

### The Valuation Discount That Can't Be Ignored
First, let's get to the numbers. The S&P 500's trailing P/E ratio as of June 2025 was 24.34, a level that qualifies it as “Overvalued” compared to its historical norms. Meanwhile, HEDJ's P/E ratio—based on its underlying European holdings—remained a lean 15.24 as of February 2025 (the most recent data available).



This gap isn't minor. A P/E of 15 vs. 24 means HEDJ's stocks are priced at roughly 62% of the S&P 500's valuation for every dollar of earnings. That's a discount that's hard to ignore, especially when you consider Europe's economic resilience and global revenue streams.

### Sector Diversification: Exporters vs. Overhyped Tech
The S&P 500 is dominated by U.S. tech giants and FAANG stocks, many of which are trading at absurd multiples. HEDJ, by contrast, focuses on European exporters with global reach—think autos, semiconductors, and industrial leaders.

Key holdings like ASML Holding (ASML), a Dutch tech powerhouse supplying chips to global manufacturers, and German automakers like BMW and Volkswagen, are cash cows with pricing power. These companies thrive on global trade, not just U.S. domestic demand. Their revenue streams are less dependent on the U.S. consumer's whims, making them a hedge against a slowing U.S. economy.

### Currency Hedging: The Secret Weapon Against Dollar Strength
The U.S. dollar's recent surge has been a double-edged sword. While it boosts the purchasing power of U.S. investors, it crushes companies with international revenue. HEDJ's currency-hedged structure neutralizes this risk: it protects investors from euro weakness while still benefiting from European equity growth.



This hedging isn't just theoretical. In 2025, the euro has fluctuated sharply against the dollar. HEDJ's investors avoid the volatility, letting them focus purely on the companies' earnings power.

### Why Now Is the Time to Go Contrarian
The S&P 500's overvaluation isn't just a technicality—it's a risk. When earnings growth slows (as it inevitably does), overvalued stocks get hit first. Meanwhile, HEDJ's lower P/E and global exposure make it a safer bet.

- Lower Risk, Higher Reward: A P/E of 15 means European equities have room to grow without the same “pop” risk as U.S. tech.
- Dollar Strength? No Problem: HEDJ's hedging ensures U.S. investors don't lose gains to currency swings.
- Global Growth Drivers: ASML's chip tools, European automakers' EV advancements, and industrial leaders are all feeding into secular trends.

### The Bottom Line: HEDJ for the Smart Contrarian
If you're tired of chasing overhyped U.S. growth stocks, HEDJ is your antidote. It offers a valuation discount, exposure to global revenue streams, and protection against dollar volatility—all in one ETF.



The takeaway? Buy HEDJ now while European exporters are cheap. The U.S. market's party might still be going, but the afterparty—where value stocks shine—will be where the real money is made.

Action Item: Allocate 10-15% of your portfolio to HEDJ. Pair it with a disciplined sell discipline at the 20x P/E threshold to lock in gains. This isn't just a trade; it's a strategic shift to safer, smarter growth.