Many investors have shied away from investing in foreign equities because of political and other factors, but many insiders believe that European equities are a worthy addition to any well-balanced investment portfolio. The growth potential for European stocks is higher than the growth potential for U.S. stocks because the U.S. is much further along in the recovery profit cycle than Europe.
Old European Equity Fund manager Kevin Lilley is among the experts on financial strategies who agree that European equities are a solid investment. He believes that the current valuations of European equities are based on depressed profits rather than actual values. This creates an opportunity for investors.
Experts from Barclays are more cautious, but still believe that European investments are likely to outperform domestic investments overall in 2016. Their concern stems from the call for a further weakness of the euro. These experts believe that weakening of the euro is likely in 2016, but Europe’s domestic economy is strengthening, which is expected to compensate for any weaknesses in the currency.
European Recovery Compared to U.S. Recovery
Recovery from a financial crisis is hard to predict, but many analysts are predicting similarities in the current European recovery and the U.S. recovery from the 2008 economic crisis. It’s expected that the European Central Bank will pump more money into the economy in the coming years, which is likely to cause an extended bull market like the one that the U.S. experienced when the Federal Reserve pumped money into our economy. The U.S. Federal Reserve is now cutting back stimulus funds, which means that American stocks are growing flatter. This makes now an excellent time to invest in European equities and slow down on investing in domestic stocks.