Why European Euphoria Isn’t Likely to Last

Why European Euphoria Isn’t Likely to Last

A prolonged period of heightened tension and difficult debt negotiations is a possibility, though the ECB QE is serving as a sort of backstop holding down contagion risks for now. It is also important to note: The majority of Greeks have expressed a desire to remain in the euro. Compromises on debt terms and budget constraints are likely in our view.

Monetary conditions and less stretched valuations are acting as tailwinds for international stock markets, even after accounting for European politics. This improvement in the relative performance of international stocks is evident and starting to impact investor behavior in the U.S., driving fund flow to non-U.S. markets.

While stocks are no longer cheap, they are a veritable bargain compared to bonds. With more of the world’s bonds being purchased by the ECB and other central banks, yields remain well below historical levels





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