GRIMALDI & PARTNERS – Will the euro equity space lag the US equity market again in 2021?
von Silvano Grimaldi, Grimaldi & Partners
Zurich - The leading German index DAX only recently made up for the slump from the corona crash of March 2020, when the US technology exchange Nasdaq in June and the broad S & P500 index in autumn of last year had already offset all losses. Will the pioneering role of the US stock exchanges continue in the current year or are there signs of relative strength in the euro area stock exchanges? Silvano Grimaldi, CEO of the independent asset management company Grimaldi & Partners AG, gives you the answer.
New year old sorry?
The euro area has great growth potential. Despite structural problems, it is more innovative, productive and efficient than most of the world's economic areas. The previous growth-inhibiting factors will remain, however, above all the rigidity of the labor markets with long protection against working contracts termination. On the other hand, the quantitative easing of the European Central Bank (ECB), together with a low oil price and a historically favorable euro exchange rate, have a stimulating effect on the EU economy.
Covid crisis as an opportunity
The Covid crisis has not only brought disaster. A milestone in the European integration process has been reached with the creation of the new European Stability Mechanism ESM Pandemic Rescue Fund. The financial aid is intended to support member states that are economically particularly affected by the corona pandemic. The important consequence is that after the new type of euro bond has been issued, the euro will be strengthened and the joint financing of the corona aid creates a security with a high credit rating. That makes the European capital market attractive and the euro a currency with international weight.
Technology power USA
The US economy will remain a growth engine for a long time to come. The growth is mainly due to a high level of innovation and the will of the USA to maintain technological supremacy. The S&P500 share index will therefore continue to be supported in the current year, primarily by the technology and health care sectors. Innovative euro area corporations have the chance, however, to continue to do better in the competitive international markets.
The combination of low interest rates, expansive monetary and fiscal policy and an expected recovery in corporate profits may have an increasing effect over the course of the year. After a possible January correction, long-term investors have the opportunity to invest more in quality growth stocks in the Eurozone. Ultimately, an appreciation of the euro should boost technological growth in the euro area.
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