Pacific Park Financial Inc. | Oct 15, 2013 01:57PM ET
Economists worldwide continue to raise their forecasts for the economies of European countries as well as the region as a whole. In particular, the International Monetary Fund hiked its 2013 prediction for the 17 country euro-zone from a contraction of 0.6% to a contraction of 0.4%. Absolute numbers notwithstanding, the direction represents improvement.
The expectation for 2014 has been increased as well. The IMF sees slightly more robust growth at 1% whereas the projection in July had been 0.9%.
Are Things Really Looking Up?
Forward-looking equity markets seem to think so. After an inauspicious first half, Vanguard FTSE Europe (EFA ), iShares MSCI EMU (EZU) and Vanguard FTSE Europe.
On the other hand, investors may be missing a bit of opportunity here. The “risk-on” trade is not merely favoring international over domestic during the U.S. government shutdown uncertainty. It has also favored small-caps over large caps. Why not look to some of the small-cap benchmarks in the international arena?
For example, since the very same June lows for VGK mentioned earlier, the momentum for iShares MSCI EAFE Small Caps (SCZ) has been much greater. In the SCZ:VGK price ratio below, one can see the impressive uptrend in SCZ’s relative strength.
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