Why European Markets Are the Smart Play for Savvy Traders Right Now
As a trend-following trader, it’s time to turn your attention to a surprising underdog—European equities. Yes, you heard me right. While many have been focused on the U.S. markets, recent trends suggest Europe is poised for considerable gains. Buckle up because we’re about to break down why adding some European stocks to your portfolio might just be your best move in 2023.
Year-to-Date Performance: Europe Outshines the U.S.
Here’s the kicker: Europe has emerged as the best-performing equity region globally this year. A report earlier this month highlighted the Vanguard FTSE Europe ETF (VGK) registering a year-to-date gain of **7.0%**, more than double the **3.1%** return from the SPDR S&P 500 ETF (SPY). This is a critical trend for traders to watch. When you see a region outperforming significantly, it’s often a signal to reassess your investment strategy.
Valuation Metrics: A Contrarian’s Dream
Take a deep dive into valuations, and the numbers tell a compelling story. Vincent Deluard, director of global macro strategy at StoneX, asserts that European stocks deserve a robust allocation in diversified equity portfolios. Why? The cyclical-adjusted price-to-earnings (CAPE) ratios. Europe trades at a **20% discount** relative to the world market average and a mere **50% lower** than U.S. stocks. The U.S. ratio has been the outlier all these years, and as seasoned traders know, valuations eventually matter. It’s crucial to keep in mind that reversals often happen when sentiment hits rock bottom—just look at previous trends!
Expert Opinions: It’s Time to Get Bullish
And here’s what’s getting the experts buzzing: with President Trump’s administration marking what Deluard calls “peak U.S.,” the trends hint that we may be transitioning into a new cycle favoring European equities. Larry Fink, CEO of BlackRock, further emphasizes this sentiment, claiming, “there’s too much pessimism in Europe. I believe it’s probably time to be investing back into Europe.” If the big guns are saying it’s time to shift focus, as savvy traders, we should take heed.
Banking Sector Recovery: Another Positive Note
The recovery of the European banking sector is another bullish indicator. After years of struggles, European banks are in a healthier state now, with improved capital ratios and growing credit lines. Deluard points out that they’ve returned substantial capital to shareholders, allowing them to perform on par with the “Magnificent Seven” stocks over the past two years. This is a massive shift in narrative that traders need to capitalize on before everyone else catches on.
How to Get Exposure to European Markets
So, how do you tap into this opportunity? The most straightforward way is through mutual funds or ETFs focused on the European market. The Vanguard FTSE Europe ETF is your go-to option here—it boasts **$17.6 billion** in assets under management and a paltry **0.06%** expense ratio. This ETF can provide you with diversified exposure to a plethora of European stocks without the hassle of choosing individual equities.
Stock Picks: Invest with Confidence
If you’re keen on individual stocks, here are some European names that are currently getting the green light from investment newsletters:
Final Thoughts: Timing Is Everything
In the world of trading, timing is everything. With the current momentum behind European equities, it might just be the right moment to rethink your investment strategy and include some of these undervalued gems in your portfolio. As always, do your homework and stay ahead of the curve. Follow the trends, seize the opportunity, and happy trading!