Displaying items by tag: europe

(New York)

The bond market seems to have lost all touch with reality. Yields are extremely low, and given the more relaxed inflation reading this month, seem likely to stay pinned. Now consider this: European corporate debt real yields just turned negative. Yes, you are paying for the privilege of holding corporate debt. The ICE BofA index of European high-yield bonds is now at 2.34%, well below inflation.

FINSUM: Is there were ever a sign of a peak, this is it. Bond yields have nowhere to go but up, as there is no defensible logic that they could sustainably move lower. Unfortunately, it seems as though bonds and equity could move hand in hand, as the catalyst for big losses would be the Fed, which would trigger both asset classes.

(Frankfurt)

Bonds yields have been so far from even survivable for most income investors, but…see the full story on our partner Magnifi’s site.

(London)

US market valuations are eye-watering. By several measures the S&P 500 is as richly valued as it has ever been. With that in mind, overseas stocks, especially in Europe, appear to be a good bet. For example, while US stocks are now well ahead of their pre-COVID peaks, the Stoxx Europe 600 is still down 9.2% since its high in February. Since March, the S&P 500 has rebounded by 60% while the Stoxx Europe 600 has only seen a 40% rise.

FINSUM: So European benchmarks are more exposed to the banks and industrials, which were more hurt by COVID than US tech companies, which dominate American benchmarks. That said, now that a vaccine is in site, there is a big chance for appreciation in Europe that seems much less likely to occur in the US.

(Berlin)

US investors are growing increasingly interested in European equities. The reasons are many. Europe has undertaken huge levels of stimulus and its economy seems to be recovering from the pandemic more quickly than the US’. Further, the Stoxx Europe 600 is still down 10% on the year versus a 6% rise in the US, which means continental stocks may have more room for gains. Another interesting aspect to note is that the continent’s mix of equities has changed markedly over the years and is no longer dominated by banks. This means higher trending earnings and less volatility.

FINSUM: So you have an economy that might get out of recession faster than the US and returns that are 16 points behind, all with very accommodating monetary and fiscal policies. Investing in Europe makes sense!

(Brussels)

Even though cases and deaths are still rising rapidly across the European continent, many governments within the EU are planning their re-opening from the Covid lockdown. Spain, Italy, Austria, and more are undertaking and/or announcing plans to reopen as soon as this coming Monday. The rollouts don’t look likely to be rapid anywhere, but their announcement may be received as an important turning point both socially and economically.

FINSUM: Markets are up big today and this is a significant part of it. Might the US start to re-open in a 2-3 weeks (?)—that is the question on investors’ minds.