The post appeared on a German-language finance forum just days ago: an Austrian investor holding iShares Core S&P 500 and SPDR US Technology ETFs announced they were halting all future purchases. Their reason wasn’t valuations, inflation fears, or recession risks, it was political. The United States, in their view, had become “Feind Europas” (Europe’s enemy), and pumping more money into US assets felt like feeding the adversary.

This isn’t isolated sentiment. Across Austria’s retail investor community, similar discussions are bubbling up, driven by trade disputes, diverging foreign policy interests, and a growing sense that US-European alignment is fracturing. But here’s where it gets complicated: the same investors still want “längerfristig guten Ertrag bei vertretbarem Risiko” (long-term good returns at moderate risk). They’re not ready to sacrifice performance for principle, they want both.

The most pragmatic solution emerging from these discussions is the MSCI World ex USA index family. Unlike pure European ETFs, these funds eliminate US exposure while maintaining global diversification across Canada, Japan, Australia, and emerging markets.

The Amundi MSCI World Ex USA UCITS ETF has become a particular favorite among Austrian investors using Flatex (a popular Austrian brokerage). With a 0.15% TER and accumulating structure, it sidesteps the dreaded Vorabpauschale (advance lump-sum taxation) complexity while keeping the Finanzamt (Tax Office) happy through automatic reinvestment. One commenter noted it represents “eine der wenigen Möglichkeiten, den USA vollständig den Zugriff auf Dein Eigentum zu verwehren” (one of the few ways to completely deny the USA access to your property).

The Xtrackers MSCI World ex-USA offers similar exposure with a €4 billion fund size and identical 0.15% TER, making it another solid option for Austrian brokers. Both funds effectively strip out the ~60% US weighting of a standard MSCI World, leaving a portfolio dominated by European, Japanese, and Canadian equities.

But here’s the diversification problem: roughly 58% of the MSCI World ex USA index is still European stocks. If your goal is geopolitical risk mitigation, you’re concentrating your bets on a single economic bloc that’s heavily dependent on US security guarantees and faces its own structural challenges.

Some investors are going further, demanding “Buy fuckin’ European” exposure. The debate quickly centers on STOXX Europe 600 versus Euro Stoxx 50.

The STOXX 600 includes the UK, Switzerland, and Nordic countries, crucial for true diversification. The Euro Stoxx 50, by contrast, is a concentrated bet on the eurozone’s largest companies, missing key markets. For Austrian investors, this matters because the Kest Tax (capital gains tax) treatment is identical, but the risk profiles differ dramatically.

A typical allocation might include:
– iShares Core STOXX Europe 600 UCITS ETF (0.07% TER)
– Xtrackers Euro Stoxx 50 UCITS ETF (0.09% TER)

The problem? Europe’s growth trajectory, demographic headwinds, and regulatory environment have historically delivered lower returns than US markets. By excluding the US entirely, you’re not just making a political statement, you’re potentially accepting a permanent return haircut.

Every Austrian investor faces the 27.5% Kest Tax on capital gains and dividends. This creates a subtle bias toward accumulating ETFs, which automatically reinvest distributions without triggering immediate tax events. Both the Amundi and Xtrackers ex-USA funds offer accumulating share classes, making them tax-efficient for Austrian brokerage accounts.

But there’s a catch: if you liquidate existing US ETF positions to rotate into ex-USA funds, you crystallize your gains and owe Kest immediately. For investors who bought the S&P 500 at pandemic lows, that tax bill could be substantial. The Finanzamt doesn’t care about your geopolitical concerns, they want their 27.5%.

This creates a classic sunk cost dilemma: hold onto US positions you morally oppose, or pay a hefty tax penalty for ideological purity. Many forum participants opt for a middle path, keeping existing US holdings but directing all new capital to ex-USA alternatives.

The most sophisticated critique emerges when you frame this as risk management rather than politics. One commenter argued: “Falls es wirklich zum Ernstfall kommt dann will ich nicht in der selben Position sein wie Aktionäre die russische Aktien vor dem Krieg hatten” (If it really comes to a serious situation, I don’t want to be in the same position as shareholders who held Russian stocks before the war).

This is a legitimate hedging argument. Geopolitical escalation could trigger:
– Asset freezes of European holdings in US accounts
– Currency controls or sanctions
– Delisting of European companies from US exchanges
– Capital flow restrictions

The risk isn’t zero. But measuring it is nearly impossible. How do you price the probability of a US-Europe economic divorce? The market certainly isn’t pricing it at any meaningful level, US equity risk premiums remain near historical lows.

Critics counter that this is just emotional market timing dressed in political clothes. As one commenter bluntly stated: “Time in the market beats timing the market.” The response was telling: moral divestment isn’t timing if you systematically redeploy over 6-12 months via a Monatssparplan (monthly savings plan). This transforms a reactive decision into a disciplined strategy.

Some Austrian investors aren’t ready to commit to ex-USA equities at all. Instead, they’re parking capital in Bundesschatz (German federal bonds) or Austrian Tagesgeld (overnight deposit accounts) yielding 3-4% while waiting for “die Situation abwarten” (the situation to clarify).

This is textbook market timing, but with a geopolitical rationalization. The opportunity cost is significant, sitting in cash means missing potential market gains if US-Europe relations stabilize. Yet for investors genuinely convinced of systemic risk, it’s a rational insurance premium.

If you’re considering this shift, here’s the concrete playbook:

1. Open a Flatex or Dadat account (both Austrian brokers with low ETF costs)
2. Keep existing US ETFs to avoid triggering Kest Tax unless you have losses to offset
3. Start a Monatssparplan into:
4. Amundi MSCI World Ex USA (ISIN: FR0010756098)
5. Xtrackers MSCI World Ex USA (ISIN: IE00BK1PV551)
6. For pure Europe exposure, add a STOXX 600 position
7. Document everything for your Finanzamt tax return, the Kest is automatically withheld, but you must report foreign funds

The key is treating this as a strategic rebalance, not an emotional purge. Set a target allocation (e.g., 50% ex-USA, 50% US) and gradually shift new contributions until you hit it.

Let’s game out the worst-case scenario: US-Europe relations deteriorate to the point of economic warfare. What happens to your portfolio?

• US-domiciled ETFs could be frozen or delisted for European investors
• European companies with US operations would face revenue collapse (think SAP, Siemens, ASML)
• Euro would likely plummet against any safe-haven currency
• MSCI World ex USA would still suffer because European multinationals are deeply integrated with US markets

In other words, true geopolitical hedging requires more than just avoiding US stocks. You’d need to own hard assets, commodities, and perhaps even cryptocurrency, exactly the kind of “Nervenkitzel” (nerve-wracking) volatility most investors want to avoid.

Divesting from US markets based on geopolitical concerns isn’t inherently foolish. The concentration risk in US mega-cap tech is real, and valuations are demanding. A strategic underweight can be justified on pure risk management grounds.

But doing it because the US is “Feind Europas” is letting emotion drive asset allocation. The data is clear: over the past century, politically motivated investing has consistently underperformed broad market indices. The investors who dumped US stocks during the Iraq War missed a 300% rally. Those who avoided European stocks during the eurozone crisis missed similar gains.

The Austrian approach, systematic, tax-aware, and gradual, mitigates some emotional damage. But it doesn’t eliminate the core problem: you’re betting against the world’s most dynamic economy based on a sentiment that could shift with the next election cycle.

If you’re truly worried about US-Europe conflict, the smart hedge isn’t financial, it’s practical. Keep your portfolio globally diversified, but maybe learn some gardening skills and ensure your passport is current. Because if the geopolitical pessimists are right, your ETF performance will be the least of your worries.

Bottom line: Use ex-USA ETFs to manage concentration risk, not to make a political statement. Your future self, and your Finanzamt, will thank you.