A two-speed Europe
The theme of a “two-speed Europe” is now ten years old. It was born in the aftermath of the 2008 financial crisis on the observation that the countries of the South had more difficulty to recover. The climax was reached in 2012 with the euro crisis. The extent of the divergence between “central” and “peripheral” Europe was then at its peak.
Since then, the eurozone has recovered. Private sector deleveraging was achieved in the countries most in need, and the dispersion of economic performance declined. But the sanitary crisis seems to have resurrected this theme, highlighting once again the fragility of the Spanish and Italian economies. The chart below shows the weak rebound/catch-up in retail sales in these southern countries.
Economists have always stressed the difficulty of establishing a common monetary policy in such a disparate economic area. This is still relevant. For example, many talk currently about the inflationary risk. But we can see that the dynamics of prices – as well as that of the unemployment rate – are quite different between these two groups of countries.
The Italian index has not made its revolution
All time low! If we look at the price-to-earnings ratio (PER), the equity Italian index looks extreme since its discount against the Eurostoxx 50 index is at its lowest. This is striking enough given that we are neither in 2009 during the financial crisis, nor in 2012 during the public debt crisis in the euro […]
Equity Market: the US vs. The Rest of the World
FACTS Equity valuation has always been a well commented subject in our industry. The notion of fundamental value is dear to many investors who refuse to believe that the equity markets can be just a casino. Historically, we see that equity valuation ratios move quite erratically. With a macro approach we find variables with more […]