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.