This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

ETFs: Playing Europe's Rebound

By Michael Johnston of ETF Database.com

The turmoil that has plagued U.S. equity markets over the last two years will no doubt have several lasting effects. Regulation of the financial sector has been permanently changed. The role of the government in the private sector has been escalated to levels never before imagined. And the wisdom of allocating nearly all of one's portfolio to U.S. securities has come under heavy fire.

As U.S. investors look to diversify their holdings beyond their borders, many are looking to Asia, where some countries have already begun raising interest rates, to drive a sustained recovery. But a growing number of investors believe European stocks are also poised to rise rapidly over the next two years amid a recovering economy, increasing corporate earnings and a favorable monetary policy.

In The Wall Street Journal, Dave Kansas outlines a fairly straightforward investment case for Europe:

  • Average price-to-earnings ratios are at about 16, down from a historical level in the low 20s in the 1990s.
  • Stocks are about 15% below their long-term average price-to-book ratio.
  • Dividend yields relative to government bond yields remain attractive.

Moreover, while Asia's swift recovery is likely to result in increased interest rates in the near term, Europe faces strong headwinds that are likely to keep rates depressed for the next several quarters, a factor that could further stimulate growth.

Uneven Growth

Despite geographic proximity and a common currency, the fates of many European economies have been remarkably independent of each other. Spain, once home to a booming construction industry, has seen its economy collapse and could experience unemployment as high as 25% in coming years. Ireland has been another laggard, as the "Celtic Tiger," spurred by low corporate taxes and improved educational infrastructure, now seems far less fierce. Even the U.K. faces significant risks, as large government stakes in financial giants Royal Bank of Scotland (RBS - Get Report) and Lloyds Banking Group (LYG - Get Report) make investors a bit uneasy.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
IEV $46.63 1.10%
VGK $57.24 1.20%
FEZ $39.79 1.40%
HBC $0.00 0.00%
BP $41.78 0.37%

Markets

DOW 18,153.98 +112.44 0.62%
S&P 500 2,119.25 +15.05 0.72%
NASDAQ 5,079.63 +46.8790 0.93%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs