Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
Will Biden’s Neo-Populist Economic Doctrine Support Gold? - 25th Sep 21
Markets Deflationary Winds Howling - 25th Sep 21
Crude Oil Price Piercing the Sky: Where Will We See the Black Gold by Xmas? - 25th Sep 21
Cryptocurrency policy choices and consequences - 25th Sep 21
The Next Emma Raducanu UK Tennis Star Pleasing the Crowds at Millhouses Park Sheffield - 25th Sep 21
Stock Market Rescued by the Fed Again? - 24th Sep 21
Are Amazon Best Cheap Memory Foam Mattresses Any good? Bedzonline £69 4ft Small Double ECO Example - 24th Sep 21
Evergrande not a Minsky Moment - 24th Sep 21
UK Energy Firms Scamming Customers Out of Their Best Fixed Rate Gas Tariffs - 23rd Sep 21
Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Should School Children be Jabbed with Pfizer Covid-19 Vaccine To Foster Herd Immunity? - UK - 23rd Sep 21
HOW TO SAVE MONEY ON CAR INSURANCE - 23rd Sep 21
Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
Trading Crude Oil ETFs in Foreign Currencies: What to Focus On - 22nd Sep 21
URGENT - Crypto-trader event - 'Bitcoin... back to $65,000?' - 22nd Sep 21
Stock Market Time to Buy the Dip? - 22nd Sep 21
US Dollar Bears Are Fresh Out of Honey Pots - 22nd Sep 21
MetaTrader 5 Features Every Trader Should Know - 22nd Sep 21
Evergrande China's Lehman's Moment, Tip of the Ice Berg in Financial Crisis 2.0 - 21st Sep 21
The Fed Is Playing The Biggest Game Of Chicken In History - 21st Sep 21
Focus on Stock Market Short-term Cycle - 21st Sep 21
Lands End Cornwall In VR360 - UK Holidays, Staycations - 21st Sep 21
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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

© 2005-2019 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