Taking money out of the US and investing in Europe

The French election results and the stability that has brought to Europe means ETF funds are now flowing out of the US markets into Europe.

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Investing in Europe

‘Blackrock’s new strategy is to take funds out of the US and put them into Europe’, says investment strategist Karim Chadid. This change in sentiment began with the French election results. Emmanuel Macron is pro-European and the former investment banker was picked by 60% of voters over Marine Le Pen's far-right agenda. Stock markets surged and the euro jumped sharply on the victory, evaporating fears of a victory by the far-right Front National.

The economic figures supporting this investment case speak for themselves: the eurozone economy has grown twice as fast as the UK in recent months. According to Eurostat, GDP in the 19 countries that use the euro expanded 0.6% in the second quarter of 2017, building on growth of 0.5% in the first quarter. Unemployment has also fallen against the backdrop of ultra-low interest rates and other measures by the European Central Bank to boost economic activity.

Chadid explains that the equity market in Europe has been resilient to a strong euro because the growth is domestic-based and so, not reliant on international currency values.

ETF flows ‘which are liquid and easy to trade in and out of’ are eurozone and Japanese equities, the strategist says. Japan has also seen some buying thanks to the higher sensitivity that its companies have to global economic growth. But the caveat to this is the strength of the Japanese Yen, given many of the country’s firms are major exporters.

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