Finally, in the blogosphere John McElligott asks if
Eurozone equities offer good value here.
Japanese and
eurozone equities have been powered by a combination of strong earnings growth and dividends.
Much of what I observed during my trip reinforces that now may be a good time to consider raising allocations to
eurozone equities.
That said, the region may fare well in a better global growth environment and find current valuations to be a potentially attractive entry point into
eurozone equities.
On a price - to - book (P / B) basis,
eurozone equities have been trading close to historical lows versus broad developed markets.
Investors looking to access
eurozone equities may want to consider iShares MSCI Eurozone ETF (EZU), iShares Currency Hedged MSCI Eurozone ETF (HEZU), or iShares Core MSCI Europe ETF (IEUR).
My general answer: Much of the region's news helps support my view that now may be a good time to consider raising allocations to
eurozone equities, and to stocks in Germany in particular.
Heidi Richardson explains why much of the region's news may support the case for
eurozone equities.
Over the past year, about 74 % of European and
Eurozone equity funds did not beat their benchmarks and among all fund categories examined, the worst performing were funds invested in global markets.
When viewed over a 10 - year period, about 92 % of actively managed
eurozone equity funds trailed their respective benchmark.
Not exact matches
But unlike the 2011 rout, sparked by the
eurozone debt crisis, the sudden collapse of global
equities markets that began last week is all about China — which makes it all the more unnerving since few have a good grasp on how the world's most important emerging economy actually works.
All markets will continue to focus on the volatility in the
equity and bond markets, geopolitical events, developments with the Trump Administration, corporate earnings, oil prices, and will turn to this afternoon's FOMC Meeting Statement followed by reports tomorrow on UK PMI,
Eurozone PPI, CPI, US Challenger Job Cuts, Productivity, Unit Labor Costs, Jobless Claims, Trade Balance, Markit Services PMI, ISM Services, Durable Goods and Factory Orders for near term direction.
However, some of that potential
equity gain can erode when your investment in the
eurozone is translated back into the stronger dollar.
That is why the
Eurozone's cost of
equity is high.
Global
equities were mixed with the NIKKEI off 0.1 %, the SCI down 1.5 %,
Eurozone shares were up from 0.1 % to 0.6 %, and S&P futures were unchanged.
Bottom line: We believe a modestly higher USD ahead supports the case for favoring
eurozone and Japanese
equities, and it does not change our preference for EM stocks.
We see similar risks to domestically exposed companies in the UK
equity market, and we favor UK and
eurozone companies geared to sustained growth in the global economy.
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But further strength in the U.S. dollar would likely be good for
equity markets that traditionally outperform on their currency's weakness, such as Japan and the
eurozone, as a stronger dollar will make their exports more competitive.
While Canadian stocks could potentially rebound in the second half, BlackRock Investment Institute currently favours
Eurozone, Japanese and emerging market
equities given still strong economic data, relatively more accommodative monetary policy and cheaper valuations.
All markets will continue to focus on the volatility in the
equity and bond markets, geopolitical events, developments with the Trump Administration, corporate earnings, oil prices, and will turn to earnings from Apple after the bell today, and reports tomorrow on Japanese PMI, Chinese Caixin PMI,
Eurozone GDP, PMI, Unemployment, US MBA Mortgage Applications, ADP Employment Change, Oil Inventories, and the FOMC Meeting Statement for near term direction.
As discussed above, the
eurozone has more ammunition today to respond to potential contagion but a favorable view of European
equities is also supported by the gradual escalation of institutional integration that is ongoing in Europe.
UK,
eurozone, Japanese and emerging market
equities have all returned close to 9.5 % a year1.
But further strength in the U.S. dollar would likely be good for
equity markets that traditionally outperform on their currency's weakness, such as Japan and the
eurozone, as a stronger dollar will make their exports more competitive.
However, some of that potential
equity gain can erode when your investment in the
eurozone is translated back into the stronger dollar.
Deutsche X-Trackers MSCI
Eurozone High Dividend Yield Hedged
Equity ETF (HDEZ) tracks an underlying index that requires consistent dividend payments and screens for quality factors including ROE, earnings variability and debt to e
Equity ETF (HDEZ) tracks an underlying index that requires consistent dividend payments and screens for quality factors including ROE, earnings variability and debt to
equityequity.
Pressure from firm dollar and falling
equities as market continues to deal with uncertainty about the
eurozone economy.
While Canadian stocks could potentially rebound in the second half, BlackRock Investment Institute currently favours
Eurozone, Japanese and emerging market
equities given still strong economic data, relatively more accommodative monetary policy and cheaper valuations.