17 Oct Europe – Unified Growth
Welcome back Growth! It’s been too long and we sure have missed you. Real GDP growth stands at 2.3% in the Eurozone slightly taller than the U.S. at 2.2%. Follow the Money and you’ll find Eurozone M3 supply up 5.0% years-on-year, 7% in the UK. Unemployment in Germany and UK has broken through multi decade lows, in France below pre-crisis 2011 levels and falling. Industrial Production across the region has surged above 2008 levels and climbing, same for retail sales and housing starts. The Euro is up 14% and Sterling 7% versus the USD. Did I mention European Equity markets? The STOXX600 is up 21% year-to-date in dollar terms. Great news? Well yes terrific if you owned sufficient European exposure, you had great kicker in your portfolio strategy. But, unfortunately, no if you have zero or minimal exposure which judging by fund flows is the more likely answer.
Investors should be forgiven their skepticism for European equities, recent history has proven treacherous for asset allocators leaving the homeland for anywhere outside of U.S. Treasuries and Large Cap. stocks. But 2017 has thus far proved significantly different, at least in terms of relative market returns, from the preceding half dozen. Europe and Emerging markets have finally awoken, supported by an economic recovery that has shifted from theory to reality, joining what is now a measured synchronized global expansion. Investors with a foothold in international markets should reap the benefits of a highly constructive macro backdrop. For those still with reservations and minimal exposure, tread wisely but tread. Accumulating exposure is our preferred path rather than chasing what remain risk on/risk off markets. However, if we watch and listen to the data isn’t this what you have been waiting for?
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