The Safest Way To Bet On Europe's Rebound
Louis Basenese | Aug 01, 2013 12:37PM ET
Don’t look now, but the investment world is warming up to Europe.
“There are a few blooms sticking up from the frozen ground,” says Steve Koenig, an analyst at Wedbush Morgan Securities.
Over at BlackRock, Chief Investment Officer Nigel Bolton believes that we’ve reached “a significant turning point for equity investors [in Europe].”
Credit Suisse (European bank stocks via the iShares MSCI Europe Financials ETF (EUFN).
But I’m not here to establish bragging rights. Instead, I’m want to provide a safe way for skittish investors (i.e. – the non-contrarians) to take advantage of the opportunity in Europe before it disappears.
As Thanos Papasavvas at Investec Asset Management notes, “[Europe is] very underinvested from a global-investor perspective.” But that won’t be the case for long. Here’s why…
Follow The Stock Market’s Lead
Make no mistake, we’re witnessing a data-driven – and therefore, legitimate – change of heart on the part of Wall Street analysts when it comes to Europe.
You see, the economy (and currency) – which was once on the brink of complete and utter disaster – is finally on the road to recovery.
Case in point: the latest reading of the euro-zone PMI Composite Output Index. Any reading above 50 indicates expansion. And it just checked in at 50.4 in July – the highest reading in 18 months.
The data underscores the European Commission’s expectation that the euro-zone economies will return to growth in the fourth quarter.
Growth Is Growth
I’ll concede that a GDP growth estimate of 1.4% in 2014 isn’t China-esque. But growth is growth. And it’s a definitive sign that Europe isn’t going to fade to black.
Of course, as I’ve long contested, we only need conditions to transition from “bad” to “less bad” for equity markets to respond. That’s happening. And stocks are responding right on cue…
Twice U.S. Stock Growth
Over the last month, European stocks are up 8.2% – nearly doubling the return of U.S. stocks.
And European bank stocks are performing even better. After hitting a series of higher lows in late June, the iShares MSCI Europe Financials ETF rallied 9.9% in July.
Now, if you’re still too scared to dip your toes in Europe via one of these ETFs, you can still benefit from the imminent turnaround… With a homegrown opportunity, no less.
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