Why? Believe it or not, the eurozone’s 19 member countries are experiencing an economic renaissance. Growth in the EU this year is expected to be the fastest for seven years, supported by lower unemployment and higher consumer spending. Momentum is now outpacing the UK and even the USA.
Europe’s early-to-mid stage economic recovery continues full steam ahead in spite of uncertainties around domestic elections, Brexit negotiations and general jitters around stocks. Pro-EU election results in the Netherlands, France and Germany suggest faster unification, thereby lowering political risk – something that has hurt investor sentiment in the past. The favourable political landscape (with Italy unlikely to derail the EU experiment), the positive monetary environment and cheaper valuations than US stocks will support Europe’s cyclical sectors.
What? Sustained above-trend economic expansion, a steady earnings outlook and rating upgrades continue to support purchases of so-called cyclical stocks. This theme focuses on European companies that are sensitive to business and economic cycles. Cyclical companies considered to be highly dependent on the economy and see profits increase in an upturn. In addition, we have added companies that are expected to benefit from tighter ECB monetary policy and higher interest rates while withstanding the impact of a stronger euro.
Takeaways: Investors optimistic about the outlook for Europe should take a look at this theme. Historically, investment in European equities has lacked the euphoria of US equities in spite of offering substantial upside potential.
Disclaimer: While every effort has been made to ensure that the datat quoted and used for the research behind this document is reliable, there is no guarantee that it is correct, and Swissquote Bank and its subsidiaries can accept no liability whatsoever in respect of any errors or omissions, or regarding the accuracy, completeness or reliability of the information contained herein. This document does not constitute a recommendation o sell and/or buy any financial products and is not to be considered as a solicitation and/or an offer to enter into any transaction. This document is a piece of economic research and is not intended to constitute investment advice, nor to solicit dealing in securities or in any other kind of investment.
Although every investment involves some degree of risk, the risk of loss trading off-exchange forex contracts can be substantial. Therefore if you are considering trading in this market, you should be aware of the risks associated with this product so you can make informed decisions prior to investing. The material presented here in not to be construed as trading advice or strategy. Swissquote Bank makes a strong effort to use reliable, expansive information, but we make no representation that it is accurate or complete. In addition, we have no obligation to notify you when opinions or data in this material change. Any prices stated in this report are for information purposes only and do not represent valuations for individual securities or other instruments.