Lackluster Eurozone Recovery
Ed Yardeni | Apr 17, 2014 12:10AM ET
So why is the European Monetary Union MSCI stock price index up 53% from 2012’s low? It’s not because of the EMU MSCI forward earnings, which shows no recovery at all. Indeed, it remains on a slight downtrend, which started in mid-2011. So far, the EMU MSCI rally has been all about valuation.
The lesson is that we should never underestimate the ability of central banks to drive up stock prices by promising to do whatever it takes to avoid financial meltdowns, recessions, deflations, and plagues. That’s what ECB President Mario Draghi pledged in his July 26, 2012 speech. He seems to be reiterating that theme recently, as I noted yesterday. So are some of his colleagues. That might be enough to drive valuations still higher for the EMU MSCI, as long as the Ukraine crisis doesn’t trip up the Eurozone’s feeble recovery.
Today's Morning Briefing: The Big Thaw. (1) From the Big Chill to the Big Thaw. (2) Spring forward. (3) February's batch of upward revisions is a big surprise. (4) Retail sales and production at record highs. (5) Housing has some headwinds. (6) Magnifying glass needed to see Eurozone recovery. (7) No recovery in forward revenues and earnings of EMU MSCI. (8) Will Draghi continue to levitate valuations? (9) Production growth slowing in emerging economies. (10) Focus on overweight-rated S&P 500 IT.
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