Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Silver Short-Term Trend Analysis - 26th June 19
Iran and the Dying Days Of the US Empire - 26th June 19
Why a Saturated Online Gaming Market Spells Good News for Gamblers - 26th June 19
Natural Gas Sets Up Bottom Pattern - 26th June 19
Has Gold Price Broken Out Or Not? Technicals And Fundamentals - 26th June 19
Stocks and XAU Gold Miners Next Bull and Bear Markets are Now Set Up - 26th June 19
Gold Price Trend Forcast to End September 2019 - Video - 25th June 19
Today’s and NINJA Loan Economy - 25th June 19
Testing the Fed’s Narrative with the Fed’s Data: QT Edition - 25th June 19
What "Pro Traders" use to Find Profitable Trades - eBook - 25th June 19
GDX Gold Stocks ETF - 25th June 19
What Does Facebook’s LIBRA New Crytocurrency Really Offer? - 25th June 19
Why Bond Investors MUST Be Paying Attention to Puerto Rico - 25th June 19
The Next Great Depression in the Making - 25th June 19
The Bad News About Record-Low Unemployment - 24th June 19
Stock Market New High, but…! - 24th June 19
Formula for when the Great Stock Market Rally Ends - 24th June 19
How To Time Market Tops and Bottoms - 24th June 19
5 basic tips to help mitigate the vulnerability inherent in email communications - 24th June 19
Will Google AI Kill Us? Man vs Machine Intelligence - 24th June 19
Why are Central Banks Buying Gold and Dumping Dollars? - 23rd June 19
Financial Sector Paints A Clear Picture For Stock Market Trading Profits - 23rd June 19
What You Should Look While Choosing Online Casino - 23rd June 19
INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - 22nd June 19
Here’s Why You Should Drive a Piece of Crap Car - 22nd June 19
How Do Stock Prices React to Fed Interest Rate Cuts? - 22nd June 19
Gold Bull Market Breaking Out! - 21st June 19
Post-FOMC Commentary: Delusions of Grandeur - 21st June 19
Gold Scores Gains as Draghi and Powel Grow Concerned - 21st June 19
Potential Upside Targets for Gold Stocks - 21st June 19
Gold Price Trend Forcast to End September 2019 - 21st June 19
The Gold (and Silver) Volcano Is Ready to Erupt - 21st June 19
Fed Leaves Rates Unchanged – Gold & Stocks Rally/Dollar Falls - 21st June 19
Silver Medium-Term Trend Analysis - 20th June 19
Gold Mining Stocks Waiting on This Chart - 20th June 19
A Key Gold Bull Market Signal - 20th June 19
Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - 20th June 19
Investing in APPLE (AAPL) to Profit From AI Machine Learning Stocks - 20th June 19
Small Cap Stocks May Lead A Market Rally - 20th June 19 -
Interest Rates Square Minus Zero - 20th June 19
Advice for Financing a Luxury Vehicle - 20th June 19
Stock Market Final Blow Off Top Just Hit… Next Week Comes the FIREWORKS - 20th June 19
US Dollar Rallies Off Support But Is This A Top Or Bottom? - 19th June 19
Most Income Investors Are Picking Up Nickels in Front of a Steamroller - 19th June 19
Is the Stock Market’s Volatility About to Spike? - 19th June 19
Facebook's Libra Crypto currency vs Bitcoin: Five Key Differences - 19th June 19
Fed May Trigger Wild Swing In Stock Index and Precious Metals - 19th June 19
How Long Do Land Rover Discovery Sport Brake Pads Last? - 19th June 19
Gold Golden 'Moment of Truth' Is Upon Us: $1,400-Plus or Not? - 18th June 19
Exceptional Times for Gold Warrant Special Attention - 18th June 19
The Stock Market Has Gone Nowhere and Volume is Low. What’s Next - 18th June 19
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

How Investors Can Profit from European Election Results

Stock-Markets / European Stock Markets Jun 09, 2009 - 04:24 AM GMT

By: Money_Morning


Best Financial Markets Analysis ArticleMartin Hutchinson writes: The European election result has been met with little interest in the United States; for one thing, the plethora of parties from 27 different countries makes it almost incomprehensible. Yet it continued a long-term, very important trend, which should be hugely interesting to international investors.

You see, the longstanding attitude toward Europe - that it is an anti-free-market continent that should be of little interest to investors - is wrong; for the last couple of decades, it has been becoming more free-market-oriented, coming closer to the U.S. economic system.

You can see this more clearly by examining the last four European elections – 1994, 1999, 2004 and 2009 – which have taken place over a period of rapid EU expansion, from 12 countries in 1994 to 27 now. To get a better feel for the trend, you need to classify the various EU parties and their alliances into three broad groupings:

  • Group I: Socialist/Green - believing in strong state control over the economy, whether for political or environmental reasons.
  • Group II: Center-right - often nationalist, but believing generally in a free-market economy, although generally with greater government involvement and more welfare payments than in the United States, and finally.
  • Group III: Centrist/Other - either small center parties holding the balance of power in domestic parliaments or the inevitable residue of the unclassifiable.

Thus, the British Conservatives and German Christian Democrats fall in Group II, as would some smaller parties, like the British U.K. Independence Party and the Swedish Pirate party (which is a small libertarian anti-copyright outfit). The British Labor party, the French Socialists, various hard-left parties and the Greens fall into Group I. The British Liberal Democrats, the German Free Democrats and such economically un-definable parties as the British National Party fall into Group III. This gives anomalies - the German Free Democrats are highly free-market-oriented, for example - but most of them are fairly small and should cancel out.

Then since 1994, EU elections have shown the following trend:

  • 1994: 12 countries. Socialist Group I parties 249 seats of 567, 44%, Group II 40%, Group III 16%.
  • 1999: 15 countries. Socialist Group 1 parties 270 of 626, 43%, Group II 45%, Group III 12%.
  • 2004: 25 countries. Socialist Group I parties 283 of 732, 39%, Group II 45%, Group III 16%.
  • 2009: 27 countries. Socialist Group I parties 243 of 736, 33%, Group II 45%, Group III 22%.

You can see the trend. The Socialist/Green contingent has declined considerably from 44% of the total to 33%, while the Center-Right has increased moderately, from 40% to 45% (the Group III - liberals and miscellaneous - is a bit overstated for 2009, because many of the small parties haven’t yet sorted out which European grouping they will align with). Individual countries swing left and right, as in the United States, but there are enough countries in the EU for these swings to cancel out, leaving only a steady movement towards the Center-right.

One of the causes of this movement is the expansion of the EU - with the exception of the Scandinavian countries, which entered in 1995, most of the new countries are former members of the communist bloc, with an aversion to many aspects of government control. Nevertheless, it’s completely consistent across all four elections, not a temporary mood swing. What’s more, it’s substantial enough to make a big difference in EU policymaking, taking it strongly in the direction of free markets, if not necessarily in the direction of smaller government. A coalition majority sufficient to push through legislation would have been socialist-dominated in 1994; it would now be center-right-dominated.

Investors would do well to bear this trend in mind. Productivity growth has been generally slower in Western Europe than in the United States - but not much slower. In Eastern Europe, however, productivity growth has run at East Asian levels of 5% per annum or more, as the generally excellent education systems and heavy foreign investment of those countries has allowed them to catch up with the rich West. Overall, it’s likely that European productivity growth will speed up in years ahead, translating into faster growth in the overall economy, as EU policymakers remove additional trade barriers and pursue reforms that are modestly free-market in focus.

In the United States, meanwhile, the Barack Obama administration looks likely to substantially increase the government’s share of gross domestic product (GDP), taking the U.S. economic picture much closer to that of Europe. That may cause U.S. productivity growth to slow to European levels. Of course, as investors we would pay more for an increasing productivity growth trend than a declining one - which is why it is strange that most Price/Earnings (P/E) ratios in the EU are below the 13.6 average of the U.S. Standard & Poor’s 500 Index.

To celebrate the EU election result - or to position yourself for the region’s favorable prospects - you might look at the Vanguard European ETF (NYSE: VGK), which tracks the Morgan Stanley Capital International Europe Index. With net assets of $1.54 billion and a Price/Earnings Ratio of 8.2, it’s a way to get into a huge market on a bargain basis.

[Editor's Note:When the journalistic sleuths at Slate magazine recently set out to identify the stock-market guru who correctly predicted how far U.S. stocks would fall because of the global financial crisis, the respected "e-zine" concluded it was Martin Hutchinson who "called" the market bottom.

That discovery was no surprise to the readers of Money Morning - after all, Hutchinson has made a bevy of such savvy predictions since this publication was launched. Hutchinson warned investors about the evils of credit default swaps six months before the complex derivatives KO'd insurer American International Group Inc. He predicted the record run that gold made last year - back in 2007. Then, last fall - as Slate discovered - Hutchinson "called" the market bottom.

Now investors face an unpredictable stock market that's back-dropped by an uncertain economy. No matter. Hutchinson has developed a strategy that's tailor-made for such a directionless market, and that shows investors how to invest their way to "Permanent Wealth" using high-yielding dividend stocks, as well as gold. Just click here to find out about this strategy - or Hutchinson's new service, The Permanent Wealth Investor.]

Money Morning/The Money Map Report

©2009 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - 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