Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Dow Stock Market Dow Trend Forecast Current State - 22nd Apr 21
Gold Rebounds Amid Positive Economic Reports - 22nd Apr 21
China's record first quarter fuels strong expansion in 2021 - 22nd Apr 21
Gold Price Next Key Level - 22nd Apr 21
Here's What to Look For When Hiring a Real Estate Agent - 22nd Apr 21
Ethereum EIP 1559 and Raven Coin - 21st Apr 21
Gold, USDX: The Board is Set, the Pieces are Moving - 21st Apr 21
World Economies Need to Find a Lot More COPPER! - 21st Apr 21
DogeCoin CRASH! Time to Start Mining BOODGIE Coin! Crypto Mania 2021 - 21st Apr 21
Pausing Stocks and Gold Fireworks - 21st Apr 21
Precious Metals and Miners Start of New Longer-Term Bullish Trend - P2 - 21st Apr 21
Looking For A Mortgage Broker? Here Is How To Hire One - 21st Apr 21
Amazon AMZN Stock PRIMEDAY SALE! Trend Analysis - 20th Apr 21
Stock Market Sentiment Speaks: You May Not Believe My 2021 Targets - 20th Apr 21
Stock Market Phase Two Projection - 20th Apr 21
Are Precious Metals & Miners Starting A New Longer-Term Bullish Trend? - 20th Apr 21
Inflation: First the Gain, Then the Pain… - 20th Apr 21
8 Stock Market Indicators in 1: Here's the Message of the Panic/Euphoria Model - 19th Apr 21
Gold - You Can Win a Battle, but Still Lose the War - 19th Apr 21
Will Interest Rates Rally Further Push Gold Price Down? - 19th Apr 21
Gold Fireworks Doubt the Official Inflation Story - 19th Apr 21
YuanPay Team Discuss The Process Of Crypto Diversification - 19th Apr 21
Central Banks May Ramp Up Gold Buying - 18th Apr 21
How to Get Rid of Driveway Weeds With Just WATER! 6 Months later NO Weeds, Ultimate Killer! - 18th Apr 21
State of the European Markets - DAX, FTSE, CAC, AEX, SMI, IBEX 35, S&P/MIB, Euro Stoxx 50, RTS - 18th Apr 21
Einvestment Fund: What You Need To Know About Investments - 18th Apr 21
Google Alphabet (GOOG) AI Deep Mind Stock Trend Analysis - 17th Apr 21
Stocks and Bonds Inflationary Slingshot - 17th Apr 21
Best Smartphone Selfie Stick Tripod Review by ATUMTEK Works with Samsung Galaxy and Iphone - 17th Apr 21
How to Give Budgie's First Bath | Easy Budgie Bathing and Water Training with Lettuce - 17th Apr 21
Record-breaking Decrease in New Passenger Vehicle Sale in Europe - 17th Apr 21
US Stocks Climb A “Wall Of Worry” To New Highs - 16th Apr 21
Gold’s Singular Role - 16th Apr 21
See what Anatomy of a Bursting Market Bubble looks like - 16th Apr 21
Many Stock Market Sectors Are Primed For Another Breakout Rally – Are You? - 16th Apr 21
What Skyrocketing US Home Prices Say About Inflation - 16th Apr 21
Still a Bullish Fever in Stocks? - 16th Apr 21
Trying to Buy Coinbase Stock on IPO Day - Institutional Investors Freeze out Retail Investors - 15th Apr 21
Stocks or Gold – Which Is in the Catbird Seat? - 15th Apr 21
Time For A Stock Market Melt-Up - 15th Apr 21
Stocks Bull Market Progression Now Shows Base Metal Strength - 15th Apr 21
AI Tech Stocks Buy Ratings, Levels and Valuations - 14th Apr 21
Easy 10% to 15% Overclock for 5600x, 5900x, 5950x Using AMD Ryzen Master Precision Boost Overdrive - 14th Apr 21
The Current Cannabis Sector Rally Is Pointing To Another Breakout - 14th Apr 21
U.S. Dollar Junk Bond Market The Easiest Money in History - 14th Apr 21
The SPY Is Nearing Resistance @ $410… What Is Next? - 14th Apr 21
The Curious Stock Market Staircase Rally - 14th Apr 21
Stocks are Heating Up - 14th Apr 21
Two Methods in Calculating For R&D Tax Credits - 14th Apr 21
Stock Market Minor Correction Due - 13th Apr 21
How to Feed Budgies Cucumbers - Best Vegetables Feeding for the First Time, Parakeet Care UK - 13th Apr 21
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Is Europe Economy, Stocks Ready to Take Off?

Stock-Markets / European Stock Markets Jul 31, 2013 - 11:51 AM GMT

By: Frank_Holmes

Stock-Markets

One year ago, European Central Bank President Mario Draghi announced that the central bank had the political will to do "whatever it takes" to save the euro. Now, the worst may be over, as suggested by stronger economic data coming out of Europe. It appears the Continent is finally on the road to a sustained recovery.


For the past few years, the U.S. has been one of the best places to invest. In fact, the S&P 500 Index has experienced its strongest bull market ever, according to LPL Financial. Highlighted by Bloomberg Businessweek, since the market bottomed in March 2009, the S&P 500 Index has "bested all bull runs since 1949," climbing 154 percent over the past four years.

Domestic Equity Market - U.S. Global Investors

This year alone through July 26, the S&P 500 Index increased 20 percent. By comparison, the Stoxx Europe 600 Index is up about 10 percent. Although European stocks underperformed, the area offers a better potential value, as equities sell at "11.8 times estimated 2014 earnings, compared with price-to-earnings multiples of 13.7 for the S&P," says Barron's.

After the U.S.'s huge run, is it possible the country will be handing off the baton across the Atlantic for the next leg of the relay race? Here are a few areas of strength that could send European stocks higher:

1. Europe is taking analysts by surprise

Take a look at the sudden divergence in Citigroup's Economic Surprise Index in Europe compared to the U.S. The indices calculate the difference between economic data releases and survey data. A positive reading suggests economic releases are beating expectations; a negative reading indicates that the market expects better economic data than is actually released.

Recently, economic surprises in Europe have spiked to a reading of nearly 57. This is significantly higher than the U.S.'s, which has been hovering under zero since April.

More Economic Surprises in Europe

2. Europe's economic growth is improving

The European Union (EU) has had its share of difficulties, but "the Continent seems to have turned a corner," reports Barron's. This is shown in the chart below, where GDP has had negative year-over-year growth each quarter over the past year. Looking forward, the area is anticipated to make significant progress. By the end of 2014, the growth rate could be around 1.7 percent.

Domestic Equity Market - U.S. Global Investors

Even though Europe has had pockets of turbulence, such as the event in Cyprus, "the eurozone has overcome the threat of systemic failure and dispelled concerns about its long-term viability. The economy is being rebuilt," says Barron's.

3. Some of the riskiest European stocks are showing relative strength

Airlines are considered one of the most economically sensitive areas of the market, with stock prices especially volatile during times of weakness. So when you see certain airline companies gaining relative strength, it's time to take a closer look.

Relative strength is a metric we use to compare the performance of different groups of stocks or sectors to identify areas of the market that are recent strong performers. Being quick to recognize relative strength can provide an edge, as long as you act quickly. In short, we believe investors should buy into strength and avoid the weak.

Of the entire airline industry, European and U.S. carriers dominate the positive momentum list, according to data from BMO Capital Markets. Asian carriers, on the other hand, are showing significant weakness, says BMO. Take a look at the year-to-date returns as of July 26, 2013:

European and U.S. Airlines Seeing Significant Lift

Themes to Capitalize On

Make sure your portfolio takes advantage of the many opportunities throughout Europe.

Emerging Europe especially benefits from a European recovery, says Portfolio Manager Tim Steinle of the Emerging Europe Fund (EUROX). These developing countries are economically tied to their western counterparts through established export trade, putting them in an excellent position to benefit from the Continent's recovery.

Here are only a few examples: More than 80 percent of Czech and Hungarian exports head to Western Europe and about 50 percent of Polish and Turkish goods are exported to Western Europe.

In addition, we expect a continued convergence of European countries. The integration process is currently underway, with emerging countries in the east working to meet the European Union's standards that include living standards, GDP, environmental standards, regulatory standards and infrastructure. See Turkey's concentrated efforts here.

"The quest for membership is a vote of confidence in Europe and its institutions," says Barron's. Next year, Latvia likely will join the EU, giving up its own currency in exchange for the euro. Lithuania also is expected to join the euro, according to Barron's.

It appears that Europe is ready for a take off. Is your portfolio on board?

Want to see more on commodities or emerging markets? Provide us with your email address and you’ll receive a note every time Frank Holmes updates his blog. You can also follow U.S. Global on Twitter or Facebook.

By Frank Holmes

CEO and Chief Investment Officer
U.S. Global Investors

U.S. Global Investors, Inc. is an investment management firm specializing in gold, natural resources, emerging markets and global infrastructure opportunities around the world. The company, headquartered in San Antonio, Texas, manages 13 no-load mutual funds in the U.S. Global Investors fund family, as well as funds for international clients.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.Standard deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is also known as historical volatility. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies. The NYSE Arca Gold BUGS (Basket of Unhedged Gold Stocks) Index (HUI) is a modified equal dollar weighted index of companies involved in gold mining. The HUI Index was designed to provide significant exposure to near term movements in gold prices by including companies that do not hedge their gold production beyond 1.5 years. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar.

Frank Holmes Archive

© 2005-2019 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