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Are European equities still the promised land?

As we start 2016 there is at least one thing which is strikingly similar to the same time last year.


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There is also a high likelihood of continued dollar strength as the US interest rate rise cycle continues and its economy carries on looking very robust. This is pretty much an open goal for European exporters as their goods and service all become steadily more competitively priced by default.

Europe’s fund buyers also still overhelmingly believe European equities continue to be in the sweet spot. It has been the most popular asset class by a distance for more than a year, and about half of your peers continue to want to buy more.

Martin Janicko, economist at Moody’s Analytics thinks they have a point, noting it is not just the PMI data and euro valuation which looks promising.

“The eurozone’s economic sentiment hit a fresh four-year high in December. Improved purchasing power of households due in part to reduced energy prices is supporting household consumption, while a decrease in energy input prices is boosting investment by firms, he said. “We expect confidence in the eurozone to pick up in the first quarter of this year, with a more robust recovery gaining traction.”

If you are of the view that enough plus points remain to expect European equities to deliver over the coming few years this week could be a golden opportunity to get more skin in the game.

China’s wobbles have sent indices around Europe down sharply this week which could be viewed as a nice buying opportunity. Germany’s DAX is down around 7% so far this week and France’s CAC 40 has dropped 5% over the past four days.

So it is obvious. Everybody can make a fortune by throwing all their money into the asset class, right? Of course this is far from the case.

The fallout from the China situation could very conceivably continue or deepen. Then there is increasing political instability in Europe driven by factors including the migration crisis and possibility of the United Kingdom leaving the bloc.