About three weeks ago, I wrote about opportunities in European equities (see Worried about US equities? Here’s an alternative!). I pointed out that stock prices in Europe were far cheaper than US, the fears about European integrity and financial system were overblown, and the market seemed to be ignoring signs of a growth recovery.
Since then, the FTSE 100 has moved to new recovery highs since the Brexit vote.
The Euro STOXX 50 has rallied through a downtrend resistance level and it’s has retreated to test support.
American investors can see a similar pattern on the USD denominated ETF (FEZ).
If you missed the first opportunity to buy into Europe, this may be your second chance.
Fears are abating
There are numerous signs that investor fears are fading over Europe. The latest BoAML Fund Managers Survey shows that concerns over a European risk premium have fallen from first place to third.
As the chart below shows, portfolio managers have been selling down their eurozone positions, but portfolio weights may have bottomed last month as the weightings ticked up slightly.
Remember all the hand wringing over European banks? This chart of European financials show that they are in an uptrend and broke out to a post-Brexit recovery high today.
When I put it all together, these are signs that Europe equities are healing. If you haven’t diversified your equity holdings into Europe, it’s not too late.