Europe on Sale!

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Asset Management, Trends  |  May 12, 2017  |  

We’ve all come across this common tourism message. During this decade, it applies to European stock markets, too. Investors avoided European equities and for solid reasons:  rolling crises, no growth, negative interest rates, and a dearth of political leadership. As a result, a yawning, historically wide gap opened between American and European market valuations. So, “Europe’s on sale,” but why go? In investment terms, Europe was cheap with no catalyst.

Early this year, a reliable catalyst emerged which, when paired with cheap valuations, makes a market attractive for investment. What was the catalyst? A revival and acceleration in European corporate profits growth. Interestingly, the continent’s profits revival has tracked quicker than here in the U.S.

What’s been the reaction? At this writing, Europe returns have eclipsed the U.S. rally year-to-date by two-fold. The initial skepticism has given way to strong European fund flows. The story looks set to continue.

At Venturi, we monitor markets to exploit these global opportunities, advising clients to set aside home country bias and invest.