That is before you begin to factor in the possibility of significant political and social disruption developing from issues such as a potential British exit from the EU and the ongoing migration crisis.
Perhaps investors are banking on fiscal measures coming through later this year, but these are far from guaranteed to firstly be implemented and secondly, lift equities markets.
Despite having an interest in the asset class performing well, manager of the Polar Capital European Income Fund Nick Davis acknowledges that Mario Draghi’s power to send European stocks upward has seriously diminished.
“With the latest ECB policy announcements, the European economy is underpinned by massive and unprecedented monetary stimulus,” he said. “The muted market reaction reflects the market consensus view that monetary policy now has little effect. We agree that structural reforms and fiscal stimulus would have a much greater positive effect on growth. However we also feel that the gradual economic repair of Europe is ongoing and it remains a relative bright spot in the global economy. “
Davis did not neglect to add the glass half full point of view to this however.
“A combination of our sanguine view of the outlook for the European economies, the launch of big stimulus by the ECB in March and the materially lower valuations of some companies mean that we are cautiously optimistic on the outlook for European equities through the rest of the year.”
European equities proponents can also fall back on the age-old argument that bottom-up stock picking magic will mean strong returns can be delivered despite these macro issues, but with 80% plus of returns coming from asset allocation, it is going to take some pretty flash stock picking to compensate for Draghi’s waning powers.
