The good thing about the Federal Reserve is that it publically discloses its balance sheet. And from its balance sheet, we can see the Fed has created about $3.5 trillion in new money after the credit crisis of 2008 to stimulate the economy.
The problem with the central bank of the eurozone, the European Central Bank, is that it’s not that easy to figure out how much money it has printed since the bank said it would start its own form of quantitative easing. But whatever new money it has created, it doesn’t look like it’s helped the eurozone economies.
Major Eurozone Countries Failing to Show Growth
Sure, we remember the economic problems of Greece, Portugal, and Spain; these countries have been more in depression than recession since 2009. But the bigger eurozone countries are now experiencing economic slowdowns.
Italy is the third-biggest economy in the eurozone. This year, its gross domestic product (GDP) is expected to grow by less than one percent. (Source: Wall Street Journal, September 16, 2015.) Italy has been in recession for three years.
The second-biggest economic hub in the eurozone, France, saw its economy grow 0.7% in the first quarter of this year, while in the second quarter there was no growth whatsoever. (Source: National Institute of Statistics and Economic Studies, last accessed October 5, 2015.)
Germany is in trouble, too. Investor confidence in that country is literally collapsing. The ZEW Indicator of Economic Sentiment, which tracks investors and analysts’ expectations in Germany, plunged to its lowest level in a year in October. It has being declining for seven consecutive months; in October, this index was 96% lower than it was in March! (Source: ZEW Centre for European Economic Research, October 13, 2015.)
Eurozone Slowdown Affecting American Companies
We know from our surveys of Profit Confidential readers that the eurozone isn’t really one of your main concerns. But what’s happening in the eurozone is impacting American companies.
Twelve companies on the Dow Jones Industrial Average report trends in their European sales. In the second quarter of this year, 10 of them reported year-over-year declines in their eurozone revenue! (Source: FactSet, August 28, 2015.) Some of the companies that reported declines in eurozone sales included big names like McDonald’s Corporation (NYSE:MCD), Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), and International Business Machines Corporation (NYSE:IBM).
It can’t be stressed enough: the economic slowdown in the eurozone is not turning around. Add a soft U.S. economy and a strong U.S. dollar to the mix and it’s no wonder the Dow Jones Industrial Average is down seven percent from its highs this year. Unfortunately, I don’t see the situation in the eurozone getting better anytime soon; I only see it deteriorating; which mean even more bad news for large American multinational public companies and their stocks. Hence, I remain negative on the stock market for the remainder of 2015.