Andrew Bailey, Governor of the Bank of England, did not mince his words. Bailey recently said cryptocurrencies have ‘no intrinsic value’ and people who invest in them should be ‘willing to lose everything. [their] money.”
Ouch! Here’s my advice: forget about cryptocurrencies, non-fungible tokens, and other exotic investments. Leave them for the “biggest fools”.
Sometimes if you want to make money, boredom is fine. Concrete example: blue-chips based in Europe are currently major investment opportunities. The broad-based STOXX Europe 600 is reaching record highs, but it is still undervalued relative to Europe’s actual growth prospects. The index is also lagging behind US stocks, so you can still find some good deals on the continent.
Vaccine deployments, central bank stimulus measures and improved international trade are creating favorable winds for the pan-European economy. Business growth in the euro area accelerated to its fastest pace in more than three years in May, as a robust rebound in the trade bloc’s dominant services industry underscored the already booming manufacturing sector. boom.
Germany, Europe’s growth engine, is reborn. As vehicle orders increase this year, the German auto industry is once again uber go.
Europe’s return to health is also a good sign for the United States. Because Europe is America’s largest trading partner, the strength of Europe ultimately means a stronger market for American products.
Read this story: Expert Q&A: Go Global For Growth
On Wednesday, the Dow Jones Industrial Average rose 10.59 points (+ 0.03%), the S&P 500 climbed 7.86 points (+ 0.19%) and the highly technological NASDAQ rose 80 , 82 points (+ 0.59%). The STOXX Europe 600, up more than 10% since the start of the year, ended essentially flat. In pre-market futures on Thursday, US indices were trading mixed.
The role of the US dollar …
The Federal Reserve’s ultra-accommodative monetary policy and accelerating growth abroad are weighing on the US dollar. Forecasts indicate that the value of the dollar will continue to decline this year. If you are invested in foreign stocks, it is a double-edged sword.
Foreign investments generally perform better when the greenback is weak. This is because when you invest in foreign stocks, you are buying two things: foreign stocks, but also the foreign currencies needed to buy them.
As foreign currencies such as the euro strengthen against a weak dollar, the returns on foreign investments held by Americans strengthen.
On the other hand, international exporters face headwinds when trying to compete with American companies whose products are cheaper because they are valued in dollars.
But currencies are volatile. Regardless of how the dollar trades in the future, stocks of European companies are on average more attractive than US stocks.
Destination: Europe …
All of these trends lead me to conclude that Europe deserves your attention as the top investment destination in 2021.
The IHS Markit Flash Composite purchasing managers index (PMI) for the global economy in May showed the United States leading the pack, but with a battered Europe making remarkable progress (see chart).
The euro area PMI climbed to 56.9 in May after the final reading of 53.8 in April. May’s level marked its highest since February 2018 and was well above the 50 mark separating growth from contraction. The consensus estimate among economists was for a reading of 55.1.
The euro area is the monetary union of 19 member states of the European Union which have adopted the euro as their main currency. The opportunities for European recovery have never been so good. EU export markets are expected to grow by 8.3% in 2021 and 6.4% in 2022.
The UK, which was once part of the EU and now on its own after Brexit, has also accelerated its economic growth, bringing COVID under control and easing lockdowns.
European businesses are expected to take advantage of rising exports, rising domestic consumer spending and the looming flood of American tourists heading to Europe this summer to take advantage of the lifting of COVID-19 restrictions and good airfares market. The European Commission currently expects 70% of adults in the EU to be vaccinated by the end of June, slightly earlier than previous targets.
European stocks have been torn apart this year and hit all-time highs, but they have yet to run. Europe’s recovery comes after many false starts. One of the main reasons I think this year is the For Europe, strong improvements are recorded in the quarterly reports on annual results of European multinationals, with some companies forecasting double-digit jumps in 2021.
It also helps Europe now have a stronger central bank. The head of the European Central Bank (ECB), Christine Lagarde, has pledged to do everything in her power to stimulate demand. The ECB expects inflation to stand at just 1.3% in 2021, giving the ECB leeway to keep rates low.
Because European stocks were taken so badly last year at the onset of the coronavirus crisis, many companies continue to be deeply undervalued. Helping too: Europeans haven’t embraced share buybacks as unreservedly as their American cousins. If you are looking for growth at a reasonable price, look across the pond.
Editor’s Note: For growth above the market, I also recommend that you consider the trading techniques of my colleague Jim Fink. As chief investment strategist of Speed merchant, Jim has developed a proprietary method of investing that consistently beats Wall Street at its own game, in rising, falling or sideways markets.
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John Persinos is the Editorial Director of Invest daily. You can reach him at: [email protected]. To subscribe to his video channel, follow this link.
