European Equity Markets Have Reached Macro Singularity

The market is increasingly driven by larger economic forces, challenging active stock pickers.

Stock prices are displayed on a financial data board at the Frankfurt Stock Exchange.

Photographer: Martin Leissl/Bloomberg

European equities are all dancing to the same beat.

Stocks across the region over the past two years have increasingly moved to the ebbs and flows of macroeconomic forces — overshadowing company- or industry-specific factors — thanks to risk aversion, low dispersion in company earnings, and a rising degree of correlation between equities and bonds. That's the conclusion from Goldman Sachs Group Inc., who note that correlations between European equities — an indication of a rising macro-driven market — are at elevated levels relative to history, though they have eased since the record highs notched in the aftermath of the Brexit vote. 

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