Last year, the U.K. took the first painful steps on the path of fiscal austerity that the U.S. has so far avoided.And the iShares MSCI United Kingdom ETF Fund (NYSE: EWU) has outperformed the major American stock market indices. The EWU U.K. ETF is up 20% in the last 12 months, compared to about 16% for the broader U.S. market.
Of course, The iShares United Kingdom ETF fund doesn’t tell the whole story. The 40 billion pound “unavoidable budget” of emergency tax increases, public sector job cuts and government spending cuts in Great Britain was incredibly unpopular with the public regardless of how the British ETF performed.
Some experts argue that Prime Minister David Cameron is trying to do too much too fast. The Conservative government, though, has its fans. Pimco fund manager Saumil H. Parikh recently argued that the U.K.’s economic policy could be could be a model for the U.S. to follow. Moody’s Investor Service recently reaffirmed the government’s AAA rating on its sovereign debt with the not surprising warning that it would be in danger if the government slacked off on its austerity policy. Read