Investors have shunned European equities over the past few years as the Continent struggled to recover from the financial and euro zone crises. But there may be life in European markets yet. The Stoxx Europe 600 index is up 0.32 percent year-to-date — a stark difference from the start of last year, when the index plunged into negative territory. The bellwether index did finish 2016 up 7.16 percent, enough of an advance that strategists on this year’s All-Europe Research Team ranking believe 2017 may be the year European equities bounce back.
Analysts at Bank of America Merrill Lynch, which tops the overall research ranking for the second year in a row, say that an uptick in global growth could begin to bring European earnings out of stagnation, a key metric for sidelined investors. The financial crisis hit European equities hard, and although a temporary boost from the European Central Bank’s stimulative monetary policy supported markets in 2015, earnings never followed. According to FactSet Research Systems, earnings remain 40 percent below 2007 highs. But if global growth holds at around 3.5 percent or goes higher, strategists predict, European earnings will rebound along with it. That could create new opportunities for long-term investors to get equities while they are still relatively cheap.
Continue reading at Making the Call Between Doom and Boom.