The Euro-Area Economy Is Just Now Nearing Its Pre-Crisis Peak, but the Growth Rate Has Been Picking Up
The developed world appears to be hitting its stride. The U.S. economy recently was more than 10% bigger than it was before the start of the global financial crisis. Since that time, economic recovery in Europe has proceeded at a much more muted pace, but as you can see in the chart, euro-area GDP has just recently approached pre-crisis levels.
More recently, however, the recovery in the euro area appears to be gaining traction. And there are a number of tailwinds that could support accelerated growth. Both Europe and Japan are benefiting from accommodative central bank policies — at a time when the U.S. Federal Reserve is poised to boost short-term interest rates. A weaker currency and lower oil prices could further boost euro-area growth.
Given the improving economic backdrop — and that forward price-to-earnings ratios suggest European companies offer more attractive values than U.S. firms — select European firms may offer better return potential going forward.
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