Video - Is it too late to be investing in Europe?
June 2017 - Is it too late to be investing in Europe? with our expert Jean-René Ouellet
SUBJECT : Europe
EXPERTS : Jean-René Ouellet
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[Jinggle music begins. The title ‘’Market Trends’’ appears in a honeycomb cell, then replaced by the video’s title: Is it too late to be investing in Europe? – June 2017. It all gives way to the Desjardins Securities logo. These images give way to Mr. Jean-René Ouellet in an office. Behind him, we can see computer screens with stock quotes].
Jean-René Ouellet (MBA, CFA, Portfolio Manager, Portfolio Advisory Group)
Last quarter, we talked about investment opportunities in Europe. Since then, European stock markets have generated gains of 13% to 20% for Canadian investors. Excluding emerging markets, Europe has shown some of the strongest gains.
Despite this positive performance, the market is still trading at a discount compared to North American markets and offers attractive fundamentals. Not only are price-to-earnings ratios lower in Europe, but dividends are also higher. Economic growth is also stronger there. Profit margins are under less pressure because even if unemployment rates fall, they will remain somewhat elevated. Domestic demand is expected to remain robust. Finally, as predicted, a political landmine was avoided in the French election. The German election should go smoothly as well. In short, things are progressing nicely.
The weakest link in Europe, according to us, is Italy. Its banking sector requires more capital and an early election in 2018 could bring a Eurosceptic party into power. A degree of caution is required.
For now, we’re still recommending slightly overweighting Europe compared to our targets. But we’ll wait for a drop in prices, or at least a consolidation, before investing new money.
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