Time to Start Shifting Your Investment Strategy Overseas?
From what I’m seeing, Europe and the eurozone appear to be in play once again, following years of torment and two recessions.
While there’s still a ways to go, you should put Europe on your radar, since a buying opportunity appears to be here. Now don’t go full-tilt and empty your capital into Europe. Instead, with the U.S. stock market facing some upside resistance, you may want to shift some of your investable capital to other regions of the world, including Europe and China. (See “China’s Macau Gambling Region: The Growth Opportunity” to learn about a small region in China that has high hopes.)
Now, I have been negative on Europe for years, but I saw some encouraging signs in 2013 after the eurozone emerged from its second recession.
The big attraction in Europe is the 800 million people living in the region who are armed with money to spend, similar to our domestic economy. For companies, Europe is a region that appears set to rally and may be a buying opportunity.
Some may question the slow growth in this region, but I say it’s better to buy at a time of misfortune than when everyone wants in—and that time of misfortune appears to be now.
OK, we still have unemployment in the double digits in the eurozone, but the confidence levels of its citizens are also on the rise, and this is good news; this means consumers will start to spend more, helping to drive economic renewal and gross domestic product (GDP) growth.
Just take a look at the region’s recent economic readings.
The GDP in the eurozone gained 0.1% in the fourth quarter. This is not a blow-out number by any means, but it’s a nice start for a region that was decimated by the global recession.
Britain—one of the top three regions in Europe (the other two being France and Germany)—is seeing growth in its industrial and manufacturing production. France reported a 1.3% jump in its industrial production. Even Spain, one of the less-fortunate countries, saw an impressive 2.6% increase in its industrial production, which was well above the estimated 1.2% growth.
If these readings are any indication, then it may be time to catch a ship across the Atlantic Ocean to the European continent.
Take a look at the chart below of the iShares S&P Europe 350 Index, which includes 350 of the top European companies. The index has been on the mend since June 2012, and it looks good.
Chart courtesy of www.StockCharts.com
If you are looking for areas to plant some capital in Europe, stick with the stronger countries, such as Germany, the United Kingdom, and France.
Some exchange-traded funds (ETFs) that may be worth a look and could possibly prove to be a nice addition to your portfolio are: iShares Europe (NYSEArca/IEV); iShares MSCI Germany (NYSEArca/EWG); iShares MSCI United Kingdom (NYSEArca/EWU); and iShares MSCI France (NYSEArca/EWQ).
Of course, if you would rather play Europe via individual companies, you can do so through multinational stocks with good exposure to these regions; here I’m talking about the likes of The Procter & Gamble Company (NYSE/PG) or The Coca-Cola Company (NYSE/KO).
At the end of the day, it may be time for you to consider taking some profits out of U.S. stocks and shifting some capital to Europe.