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Why Investors Should Look to the Eurozone for Value



The 2015 Spring Update to BlackRock’s annual outlook highlights a few key areas, but you may still be looking for more details about the specific markets and sectors. Here are four equity segments to consider now, including options for accessing these exposures with iShares exchange traded funds.

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Investors should look to the Eurozone for value

There are several reasons to consider the Eurozone, and Germany in particular. First, the European Central Bank’s (or ECB)’s $1.1 trillion bond-buying program is beginning to serve as a catalyst for economic growth in Germany and the broader region. It also has pushed yields to negative territory in some cases, driving income-seeking investors toward European stocks, according to first-quarter flow data. In addition, the stronger U.S. dollar could potentially boost the revenues of the region’s export-oriented economies, notably Germany. Finally, European stocks still trade at a significant discount to their U.S. counterparts and their long-term average.

Why investors should look to the eurozone

Market Realist – Investors should look to the Eurozone (EZU) (IEV) for value. European equities (FEZ) have been benefiting from the $1.1-trillion stimulus that went into effect on March 9, 2015. These equities have been vastly outperforming the S&P 500 (IVV) in 2015, as can be seen in the graph above. Europe continues to benefit from the lower price of oil (BNO), weakening Euro-supporting exports, renewed consumer spending, and central bank action.

Investors should look to the Eurozone

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Germany (EWG) (DXGE) seemed to be benefiting from the ECB’s expansionary monetary policy as the economy picked up speed in the first quarter. Retail sales in Germany grew by 3.6% in February, and the indicator has been rising for three consecutive months. The unemployment rate for March came in at a 15-year low of 6.4%. The Economy Ministry of Germany has upgraded its forecast for the GDP growth rate in 2015 to 1.8% from its January estimate of 1.5%. Leading economic institutes of the country have an even more optimistic view. They estimate that the growth rate for 2015 will increase to 2.1%.

The previous graph shows that business confidence surged to a 10-month high in April. The business confidence index climbed for the sixth consecutive month to 108.6 in April, up from the 107.9 as estimated in March. Economic indicators seem to suggest strength in the German economy, so German equities could offer a good opportunity to investors.


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