Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
Gold Stocks Investment Wanes - 20th Jul 18
Diversifying Your Stock Investing Strategies is Smart Investing - 20th Jul 18
Custom Global Stock Market Indexes May Be Sounding Alarms - 20th Jul 18
S&P 500 Just 2% Below Record High, But There's More Stock Market Uncertainty - 19th Jul 18
Stock Market Technical Picture - 19th Jul 18
Gold Market Signal vs. Noise - 19th Jul 18
Don’t Get Too Bullish on Gold - 19th Jul 18
Bitcoin Price Rallies to Upper Channel – What Next? - 19th Jul 18
Trump Manchurian President Embarrasses Putin By Farcically Blowing his Russian Agent Cover - 19th Jul 18
The Fonzie–Ponzi Theory of Government Debt: An Update - 19th Jul 18
Will the Fed’s Interest Rate Tightening Trigger Another Financial Crisis? - 18th Jul 18
Stock Market Investor “Buy the Dip” Mentality is Still Strong, Which is Bullish for Stocks - 18th Jul 18
Stock Market Longer-Term Charts Show Incredible Potential - 18th Jul 18
A Better Yield Curve for Predicting the Stock Market is Bullish - 18th Jul 18
U.S. Stock Market Cycles Update - 18th Jul 18
Cayton Bay Hoseasons Caravan Park Holiday Summer 2018 Review - 18th Jul 18
What Did Crude Oil - Platinum Link Tell Us Last Week? - 17th Jul 18
Gold And The Elusive Chase For Profits - 17th Jul 18
Crude Oil May Not Find Support Above $60 This Time - 17th Jul 18
How Crazy It Is to Short Gold with RSI Close to 30 - 16th Jul 18
Markets Pay Attention Moment - China’s Bubble Economy Ripe for Bursting - 16th Jul 18
Stock Market Uptrend Continues, But... - 16th Jul 18
Emerging Markets Could Be Starting A Relief Rally - 16th Jul 18
(Only) a Near-term Stock Market Top? - 16th Jul 18
Trump Fee-Fi-Foe-Fum Declares European Union America's Enemy! - 16th Jul 18
US Stocks Set For Further Advances As Q2 Earnings Start - 15th Jul 18
Stock Market vs. Gold, Long-term Treasury Yields, 10yr-2yr Yield Curve 3 Amigo's Update - 15th Jul 18
China vs the US - The Road to War - 14th Jul 18
Uncle Sam’s Debt-Money System Is Immoral, Tantamount to Theft - 14th Jul 18
Staying in a Caravan - UK Summer Holidays 2018 - Cayton Bay Hoseasons Holiday Park - 14th Jul 18
Gold Stocks Summer Lows - 14th Jul 18
Trump US Trade War With China, Europe Consequences, Implications and Forecasts - 13th Jul 18
Gold Standard Requirements & Currency Crisis - 13th Jul 18
Focus on the Greenback, Will USD Fall Below Euro 1.6? - 13th Jul 18
Stock Market Outlook 2018 - Bullish or Bearish - 13th Jul 18
Rising Inflation is Not Bearish for Stocks - 13th Jul 18
Bitcoin Picture Less Than Pretty - 13th Jul 18
How International Observers Undervalue the Chinese Bond Market - 13th Jul 18
Stocks Trying to Break Higher Again, Will They? - 12th Jul 18
The Rise and Fall of Global Trade – Redux - 12th Jul 18
Corporate Earnings Q2 2018 Will Probably be Strong. What This Means for Stocks - 12th Jul 18
Is the Relative Strength in Gold Miners to Gold Price Significant? - 12th Jul 18
Live Cattle Commodity Trading Analysis - 12th Jul 18
Gold’s & Silver’s Reversals’ Reversal - 12th Jul 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

4 Reasons European Stocks Will Make a Big Comeback This Year

Stock-Markets / European Stock Markets Aug 22, 2017 - 05:24 PM GMT

By: John_Mauldin

Stock-Markets

BY STEPHEN MCBRIDE : Just a year ago, Europe looked like the last place where you’d want to put your money.

The UK had voted to leave the EU, top German and Italian banks were in shambles, and populists reigned on the Continent.

The issues that plagued Europe didn’t fade away, but the turmoil subsided.

While everyone was applauding the uptick in US growth after the election, Europe recorded higher growth in 2016. This reversal of fortunes has now begun to show up in the markets.


Since the beginning of 2017, the the main ETF for the European market (Vanguard FTSE Europe ETF (VGK)) is up twice as much as the SPDR S&P 500 ETF (SPY).

After six years of underperformance, European equities look very positive compared to their US counterparts.

Here are four big reasons why.

  1. The Valuation Gap

The cyclically adjusted price-to-earnings ratio, aka the Shiller P/E suggests European stocks are now trading at a 55% discount compared to US equities.

Source: Mauldin Economics

European equities today aren’t far above their 2011 crisis lows. Also, their value in relation to US stocks is the cheapest in decades.

In a recent outlook, Credit Suisse said Europe was its “most preferred region,” citing attractive valuations as a major reason.

Besides, European stocks also offer higher dividends than US equities. The average dividend yield in Europe is 2.5%... 0.6% higher than the S&P 500 average.

  1. Follow the Big Money

In the latest edition of the BoAML Global Fund Managers Survey, a record 81% of asset managers said that US equities were overvalued. In contrast, 23% believed European stocks were undervalued.

This spread is the largest ever recorded.

Source: Mauldin Economics

The respondents include 200 of the world’s top asset managers who oversee over $500 billion.

Their bullish sentiment toward Europe could be one of the reasons we have recently seen the largest inflows into the region since 2015.

Source: Mauldin Economics

In March, JPMorgan stated it was overweight Europe due to solid economic momentum and fading political risk. It also projected Euro stocks would outperform their US cousins by 16% over the next decade.

Given their recent outperformance, we are likely to see more inflows into European markets—especially with economic fundamentals now improving. (Download our free report to learn more about the new asset class raising in popularity that helps Investors earn 7% yields while lowering their risk)

  1. Credit Demand and Manufacturing Are Rising

Europe had higher GDP growth than the US in 2016. With two leading growth indicators now trending upward, the momentum is likely to continue.

The first indicator is a rising demand for credit. 

Source: Mauldin Economics

Given that banks fund 75% of loans in Europe, compared to just 25% in the US, this trend is very bullish for European financials.

The second indicator is manufacturing.

The manufacturing sector has been growing steadily over the last 12 months. In June, the European Purchasing Managers Index, a key economic indicator, hit its highest level since 2011.

Source: Mauldin Economics

These indicators paint a positive outlook for European equities devalued by years of stagnation.

  1. Bund Yields Are Rising

Since April, the German 10-year Bund yield has soared by 200%.

This is another positive sign for European equities. Credit Suisse found that for over a decade, European equities have tended to outperform US markets when Bund yields are rising.

Source: Mauldin Economics

I could go on, but it’s clear that years of stagnation pushed European equities down to bargain levels. Couple it with improving economic fundamentals, and we have a strong case for Europe’s big comeback this year.

Free Report: The New Asset Class Helping Investors Earn 7% Yields in a 2.5% World

While the Fed may be raising interest rates, the reality is we still live in a low-yield world. This report will show you how to start earning market-beating yields in as little as 30 days... and simultaneously reduce your portfolio’s risk exposure.

Claim your free copy here.

John Mauldin Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules