With the various issues plaguing Europe over the past few years, it isn’t surprising that equity market valuations have been depressed. Yet given the general feeling that the worst of the European crisis may be behind us, allocations to Europe have been increasing and certain markets have experienced strong gains in 2013.
As I highlighted in two previous blog posts, automobile ownership in emerging market countries is expected to see major increases, as more people enter the middle class and see their disposable income rise.
Europe’s economy experienced six straight quarters of negative economic growth—or contraction—before returning to a positive growth rate—or expansion—in the second quarter of 2013. The recovery in Europe has been supported by accommodative monetary policy, low inflation and a moderation in fiscal austerity.
The fast growth rates of autos in emerging countries and large numbers of possible purchases are two elements that have the potential to make investors forget some of the more basic elements of investing—such as valuation.
Since the financial crisis, global interest rates around the world have remained low, ultimately driving down bond yields. Now that growth has stabilized and expectations are beginning to increase, investors are looking for options outside of fixed income to potentially participate in this growth.