Author Topic: What happened to European stocks starting April 2015?  (Read 7664 times)

elliott

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Re: What happened to European stocks starting April 2015?
« Reply #20 on: January 09, 2020, 04:42:39 AM »
there are many people in Europe who believe they lived better before the euro and all.
people have very bad memory.


Cigarbutt

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Re: What happened to European stocks starting April 2015?
« Reply #21 on: January 09, 2020, 05:14:15 AM »
Europe has some good companies but it's amazing what shooting yourself in the foot as a society and system can do to reduce returns. UK and Canada and Australia have not had great returns either due probably to commodity focus.
I don't necessarily disagree but, if you have time, can you provide evidence backing this up?

Proof (I assume you mean the empirical kind) for something such as that will always be indirect at best since it's impossible to isolate the variable under study.

An  example of indirect evidence of what he's saying is in fact the lackluster return of the index discussed in this thread (but it can never be proof as so many other factors are present and can't be controlled pr compensated for).

The reason why his statement is obviously true is simple logic. However I won't delve into that as not to derail the thread into a political one.
Thanks. That's a fair answer and let's not waste time (and residual reciprocal sympathy :) ) discussing politics.
Long term wise, some countries, such as the US have done relatively well compared to others and there may be 'obvious' reasons for that.
https://engineeredportfolio.com/2017/07/30/which-country-has-the-best-stock-market/

However, going back to the idea of this thread, it seems to me that European stocks, in general, showed a comparable performance to US stocks, from the end of the 1990s to around 2010. What happened since then is quite a significant divergence and that raises some questions (some of them perhaps not worth discussing on an investment board):
-Are the countries part of Europe doing OK and it's the European project falling apart?
-With the divergence in the banking sector explaining most of the total divergence, is the US 'winning' or is Europe acting as a leading indicator?
http://thecorner.eu/world-economy/european-versus-us-stockmarkets-european-banks-against-us-technology-firms/76071/
Note: The article was written in October 2018 and the author felt that things would "normalize".
So are things normalizing or becoming more absurd?

RuleNumberOne

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Re: What happened to European stocks starting April 2015?
« Reply #22 on: January 09, 2020, 07:22:41 AM »
Yeah, labor laws in Germany don't allow layoffs to happen right away, they take years to take effect.

2019 jobs cuts in manufacturing total 100k with more expected in 2020.  The DAX is close to its all-time high despite the job cuts! I just want the Euro to fall apart because things have gotten very boring.

https://www.bloomberg.com/news/articles/2019-11-15/german-industrial-job-losses-top-80-000-with-daimler-cuts

"The full effect of the cuts -- which also affect units of German companies abroad --- may not be felt immediately. Labor laws and powerful unions make it difficult to fire workers, and many large companies have agreements banning forced dismissals, meaning job-cut programs have voluntary elements and sometimes run for years."


https://think.ing.com/snaps/germany-new-orders-nov-19/

Looks like the Euro doesn't work for Germany either?

"Germany: Getting worse instead of getting better

A sharp fall in November industrial orders shows that a bottoming out of the manufacturing slump is anything but near

Currently, 2019 is on track to record a monthly average drop of some 0.6%. Moreover, while 2018 was mainly about weaker foreign orders, the order book deflation reached the domestic economy, with domestic orders dropping faster than foreign orders. To illustrate how unique this long stretch of falling orders is for German industry, the last time German order books shrank for two years in a row was in in 2001 and 2002. Ahead of the Great Recession, order books shrank by 2.9% on average every month in 2008.

All in all, there are still no signs at all of a bottoming out for German industry. Instead, the free fall continues. In fact, there is simply one word to describe the current state of the German industry: ‘dire’.
"

This is all true to some extend, but as I mentioned before , most Germans don’t own stock and the unemployment rate is 3.2%, which is full employment and then some. The unrest in the populace, which will eventually eventually Merkels removal (imo) is related to I immigration policy etc and not to economic issues.

RuleNumberOne

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Re: What happened to European stocks starting April 2015?
« Reply #23 on: January 15, 2020, 09:46:25 AM »
The DAX is at an all-time high but GDP growth is at a 6-year low.

https://www.wsj.com/articles/german-growth-falls-to-six-year-low-hit-by-manufacturing-recession-11579086072

"Germany is the first major economy to report full-year growth figures for 2019.

The German economy grew by 0.6% last year, the slowest rate since 2013, at the height of the eurozone’s debt crisis.

Many German companies have been laying off staff, raising concerns that the manufacturing slowdown could start to affect private consumption.

Brose Group, an auto parts producer, said in October it would reduce its German workforce by around 2,000 by late 2022. It blamed the declining auto market, especially in China. Continental AG , a giant auto parts manufacturer, announced plant closures in Germany in November as part of a sweeping restructuring plan.

With Chinese economic expansion unlikely to return to earlier rates, German growth “will remain close to zero for now,” said Marco Wagner, an economist at Commerzbank."

RuleNumberOne

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Re: What happened to European stocks starting April 2015?
« Reply #24 on: January 15, 2020, 09:50:05 AM »
https://www.wsj.com/articles/chinas-auto-market-stumbles-after-30-year-boom-11578949633

"“This is now the new normal,” Volkswagen Group China Chief Executive Stephan Wöllenstein told The Wall Street Journal in November. Other major markets typically see ups and downs in car demand every few years, but China has known only growth for three decades. The slump, he said, is “a new phenomenon in China which nobody was really aware of—that an automotive market also could turn down.”

Auto makers operated at 76.1% of their production capacity in the July-September period, down 3.5 percentage points from a year earlier for a fifth straight quarter of decline, data from the National Bureau of Statistics show.

The downturn has been unfolding for the past year and a half.
When Pangda listed, “the overall Chinese auto market was booming and growing rapidly,” the company’s new president, Zhao Tieliu, said in an interview. “No one could see at that time the market was at a saturated stage and would quickly go down.”"

Spekulatius

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Re: What happened to European stocks starting April 2015?
« Reply #25 on: February 07, 2020, 06:36:28 PM »
I know it’s against the narrative here, but Unicredits results look pretty good to me:
https://www.unicreditgroup.eu/content/dam/unicreditgroup-eu/documents/en/investors/group-results/2019/4Q19/UniCredit_PR_4Q19_ENG.pdf
Pretty much any metric (profits, capital buffer, Non performing assets ) turned in the right direction.

Also, the Italian election turned into a whimper and pretty much kept the status quo. It doesn’t look like Italy will be leaving the EU anytime soon.
« Last Edit: February 08, 2020, 04:30:57 AM by Spekulatius »
Life is too short for cheap beer and wine.

RuleNumberOne

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Re: What happened to European stocks starting April 2015?
« Reply #26 on: February 07, 2020, 07:31:47 PM »
Yeah, i have surrendered to the Eurocrats and ECB. They have nailed everything down so that nothing and no one can get away. I agree it doesn't look like Italy can leave easily.

Nothing ever fails and the markets are never allowed to punish poor results. You would never think the DAX would be at an all-time high with the bad economic news in Europe.

Central bankers have bought half of everything everywhere and market prices don't reflect any business results anymore. We should be thankful stocks still have a positive dividend yield. Come to think of it, why do we need a stock market or a bond market anymore? The Soviet Union did not bother with the formality of a stock exchange.



https://www.bloomberg.com/news/articles/2020-02-07/german-economic-weakness-exposed-again-as-industry-slumps

"Germany is facing a possible recession again after industrial production plunged by the most since the global financial crisis.

The 3.5% slide in December’s output comes a day after a report showed factory orders declining at the fastest pace in more than a decade. That suggests Europe’s largest economy may have contracted at the end of 2019, according to Bloomberg Economics, and dragging itself out of the hole this year has become even more challenging with the coronavirus hitting global business.

There was further bad news for Europe on Friday, with France reporting a 2.8% drop in industrial output in December, and Spain posting a 1.4% decline. Both readings were far worse than economists had anticipated. The Netherlands added to the gloom, with manufacturing shrinking 1.7%, the most since 2018."

I know it’s against the narrative here, but Unicredits results look pretty good to me:
[url] https://www.unicreditgroup.eu/content/dam/unicreditgroup-eu/documents/en/investors/group-results/2019/4Q19/UniCredit_PR_4Q19_ENG.pdf[/utl]
Pretty much any metric (profits, capital buffer, Non performing assets ) turned in the right direction.

Also, the Italian election turned into a whimper and pretty much kept the status quo. It doesn’t look like Italy will be leaving the EU anytime soon.

Cigarbutt

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Re: What happened to European stocks starting April 2015?
« Reply #27 on: February 08, 2020, 05:59:31 AM »
^Disclosure: I don't have specialized knowledge about Italy's finances but have followed the banking sector and Unicredit and have shared some sentiment with people living in Italy.

The big story for many European and Italian banks (including Unicredit) has been the net interest margin and the evolution of non-performing loans. Unicredit has done a reasonable job at cleaning its balance sheet and the Bank of Italia has recently downgraded the non-performing loans issue from threat to financial stability to a number to simply follow. However, the process has been painstakingly slow and IMO incomplete. Of course, the ECB (and Italy's growing public debt) has allowed that. It is fair to say that slow adjustments are less painful but I wonder if this is not an example of a wasted crisis opportunity as the potentially dead has become a zombie. Private credit growth has been declining (see second link and click max) and how can this trajectory be changed within the Euro construct does not appear possible under present circumstances.

https://www.econstor.eu/bitstream/10419/173102/1/PC-06-2017.pdf
https://tradingeconomics.com/italy/loans-to-private-sector
https://www.bloomberg.com/news/articles/2020-02-08/ecb-s-visco-sees-significant-risks-for-italy-s-economy-in-2020?srnd=markets-vp
I can provide a few quotes from the third link if access is a problem.

Spekulatius, I really admire the way you change your mind when facts don't go your way at times and wonder if the ECB and other macroprudential public entities should not apply the same principles when dealing with the economic consequences of superficial peace.

BTW, Unicredit tends to produce good research about who's holding what in the public and reciprocal sphere:
https://www.research.unicredit.eu/DocsKey/fxfistrategy_docs_2019_170284.ashx?EXT=pdf&KEY=KZGTuQCn4lsvclJnUgseVEGHysWJl2NsEwG0xblWxFK9BVQAB4eryA==&T=1

RuleNumberOne

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Re: What happened to European stocks starting April 2015?
« Reply #28 on: February 08, 2020, 09:03:33 AM »
Despite the terrible economy of the last several years, Italy's stock market is also at an all-time high, just like Germany's. The economies keep going down in Europe but the stock market keeps going up, year after year.

We can't call it a stock market anymore because it does not reflect any economic results. Therefore nothing that Warren Buffett or Ben Graham or Charlie Munger said applies here. Don't central bankers feel any guilt for destroying free markets?

https://tradingeconomics.com/italy/stock-market

I wonder if we can get central bankers to stop destroying free markets if we remove their perks. It seems Eurocrats get a bed in their offices for siestas along with lavish drinking and eating budgets.

rb

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Re: What happened to European stocks starting April 2015?
« Reply #29 on: February 08, 2020, 09:48:55 AM »
There are several idiosyncrasies between Europe and the US that result in stock market differences.

1. There is A LOT more private business in Europe. This simply doesn't show up in the stock market, so the stock markets of Europe are far less representative of the underlying economy than in the US. Germany in particular, for the size of its economy, its stock market is a joke.

2. Dividend yields tend to be higher in Europe. So you get more of your return via dividends which puts downward pressure on nominal stock index values.

3. Related to 2 above, there is far less buyback activity in Europe than in America. This probably has to do with the fact that they use less far fewer stock options in executive compensation. This of course creates differences in the share prices and the value of some indexes.

4. Bond yields. European bond yields are lower and have been for a while. Which normally lead to lower absolute results. Stock returns are a risk premium posted on bond returns. You lower bond yields and you'll end up with lower stock returns even though as a stock investor you will be adequately compensated for your risk.