While many investors are hoping for a good year such as what happened in 2017 it is not going to happen. It may not be happening yet investors are not ready to give up especially on companies that are still going strong.
It is bad news for investors in equity as they hope the stock market will repeat the great year of 2017. During 2017 the European markets had overcome the sovereign debt and were seeing a boom economically. But 2018 has not had the results that investors were hoping for.
The European region overcame the sovereign debt of 2012 and was actually seeing an economic boom. European investors were enthusiastic about this boom. With European stocks rising only 1.3% this year that enthusiasm has been declining.
Economic data has created doubt that there will keep on being a rise in corporate profits. This has caused the index to fall 4.2% off the high in January. Plus in the past seven weeks, $19 billion has left equity funds.
Bank of America Merril Lynch states that positions that are overweight have actually slipped to 34% since 58% last October. This makes it a thirteen month low in April.
Rothschild Wealth Management’s global investment strategist has also lost faith in the market. He wants to know when the Euro market is going to perform especially since it did not do good last year. His stand on this is definitely understandable.
Key eurozone manufacturing activity gauge IHS Markit’s flash PMI survey shows that the stock market dropped to 55.2 which is a fourteen month low. This also includes the loss of confidence in Germany.
Analysts were nor prepared for the slowdown in growth. Citi surprised everyone with its indicator that eurozone had fallen to the lowest it has been since June 2012.
First quarter growth went down from the three months previous could be a signal that the market will keep on decreasing according to what bear are saying.
While a lot of investors believe that the market will keep going down others are not ready to give up just yet. They say that the decline was to be expected and will start increasing. Another investor states that since the stock market had risen so high it just made the fall seem worse than it actually was.
Most investors keep hanging on is because they believe that the regional companies will deliver large profits. European stock had not had any growth in seven years until 2017. Thomson Reuters I/B/E/S states that Euro markets should deliver a 7.5% growth this year.
MSCI Europe earnings in the first quarter should show growth of 0.6%. While this is in euro terms in dollar terms it is 12.1%. What gives investors reassurance is euro zone’s new political stability. The best example of this is that Italian stocks gained 9.7% year-to-date. Italian stocks are the best performers globally. This is despite new elections after an indecisive vote in March.
While the euro is losing value and the dollar increasing it makes more sense for investors to buy American since Uncle Sam gives them more yield.