Europe’s Long-Suffering Stock Market May Get What It Needs
The European economy would benefit from less monetary and more fiscal stimulus, which looks like it will soon arrive.
European stocks always seem to deliver disappointment.
Photographer: Patrick Smith/Getty Images
Back in 1999, investors optimistic about Europe’s prospects rang in the new millennium with the Euro Stoxx 50 Index closing at 4904.46, gaining some 47% for the year and trouncing the S&P 500 Index’s humbler 20% rise. That confidence proved to be near the height of European fortunes. Today, the Euro Stoxx 50 index is 28.45% lower at 3512.22. Even with dividends, the annual return for European stocks is a paltry 1.82%, compared with the S&P 500’s 6.93% over the same period.
There have been plenty of false starts over the past 22 years for European stocks as market strategists predicted the time to rally had finally returned. Bullish forecasts always ended in disappointment, however, as European stocks consistently underperformed their American counterparts. On a relative basis, European equities have experienced a brutal 22-year secular decline, with the ratio of the Euro Stoxx 50 to S&P 500 plunging to new lows amid the horrific developments in Ukraine.