European Stocks Hit A Five Year High

How Can European Stocks Be Performing So Well?

North KoreaIf you have been paying attention to the news over the last several years, European stocks would have been the farthest thing from your mind as a potential investor’s goldmine.  From government insolvency, multi-year credit, banking, and political problems within the Eurozone, It almost seemed as if there was no foreseeable solution to correct the deep rooted problems within the infrastructure of Eurozone countries.  In fact, from time to time a total breakup of the union seemed a real possibility if no other solution could be reached to correct the financial problems.  How many times did you hear people say “The U.S. better get its act together so it doesn’t become like Europe.”  Or “Europe is a total mess.”  Europe has become the poster child of poor policy and poor governance.  However, in spite of all of this, the Stoxx Europe 600 Index just pulled off a 5-year high.  How can that happen in spite everything going on over there?

European Stocks Were A Good Value

In short, the prices of the stocks dropped to such low levels, that investors assumed they had nowhere to go but up.  In fact, the potential was so attractive that the most tenacious investors jumped into Euro stocks followed by other more cautious investors as it became more certain that Europe wasn’t going to totally fall apart.

Most European Stocks Are Globalized

Another factor that impacted the success of the European markets is that most companies in Europe are not solely dependent on the European region for their business.  Big names like Nestle, Lever Bros, Siemens, Volkswagen, BMW, SAP, Allianz HSBC, Barclays, Vodaphone, etc. are highly interconnected all around the world and are not at risk of going out of business because of European financial problems.  In fact, HSBC just made the announcement that their earnings doubled from $4 billion to $8 billlion because of cost cutting and a strong position in Asia.

The Economy Doesn’t Predict Market Performance

Just as we have seen to be true here in the U.S. the state of the economy does not always predict the success of an investment.  Investors must focus on prices and valuation and not what the news is touting.  For more information on investments that are expected to perform in spite of today’s economy, speak to a Redhawk Financial advisor near you today.



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