Wait Up, America

Europe bull market

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What's going on?

It’s official: European stocks have entered a “bull market”. And poor recent economic data may actually be helping.

What does this mean?

As of Wednesday, the stock prices of Europe’s largest companies had risen 20% above their December doldrums. That entry into a bull market has liberated European stocks from their longest “bear market” – when stocks sit more than 20% off their most recent peak – in a decade (tweet this).

European stocks have now joined the US in greener pastures. Its stock market is still enjoying its longest-ever meaningfully uninterrupted rise – and is now posting new record highs daily.

Why should I care?

For markets: A weak eurozone economy could be doing its stocks a favor.

Whether European stocks can hold on to the bucking bronco partly depends on what the European Central Bank does next. Data suggesting parts of the eurozone economy are shrinking will likely spur the bank into action, cutting interest rates and perhaps reintroducing other recently removed support. This should lower borrowing costs, encourage consumers to spend more, and boost the economy. And it’d help companies too: as well as increased demand for their products, firms will be able to invest more cheaply in themselves – ultimately helping to increase their profits. It’s a similar story Stateside – and investors’ anticipation of this may be responsible for the recent buying that’s pushed both regions’ stocks into full bull mode.

For you personally: How to survive a bear attack.

Hedge funds perhaps have an easier time navigating a bear market than most, since they often bet on individual stocks which should rise when the wider market falls. Other investors tend to rebalance their holdings rather than sell up and ship out – buying more “defensive” stocks and keeping more money in cash. Like it or not, a bear market will come knocking sooner or later – and reading our essential guide to navigating one will mean you’re prepared when the time comes.

Originally posted as part of the Finimize daily email.

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