There's Hope for 3% Plus Growth – Even Without Washington

There’s been a hope trade since the election that growth is going to come back, but we’ve seen little definitive policies accompany the promise of lower taxes, infrastructure plans, profit repatriation, and deregulation.

But there’s a new white knight emerging, no not the China materials demand that helped us out of the ‘Great Recession’, but this could be – Greece!

Well, no, not just Greece but it is turning the corner, but I’m talking more about the Eurozone consortium together in unison, which is also our largest trade partner. Data on Monday morning suggested that their factories had the busiest month in 6 years.

The gains, according to the heavily watched IHS Markit Survey came from Germany (the economic heartbeat of the Eurozone), France, Italy, Austria, Netherlands, and none other than formerly troubled economy Greece.

That’s impressive, but what does it mean for us?

For the fast time since the global recession, we have a more countries firing away to the tune of growth, meaning we’ve got more cylinders firing in this expansionary cycle for the first time! In this global economy, trade and capital flows helps countries and their trading partners to grow in positive feedback loop.

The US had been growing at a dismal growth rate of 1.5-2.0% in terms of GDP which includes the lag of dismal growth numbers from its main trade partners. But now with Europe and much of the world growing again, the coordinated growth will help us sustain and possibly improve our own growth rate, to the target of 3% or more.

The market may have already been sniffing that out and has rewarded Europe’s stocks:

The out-performance is there, but not all assets are benefiting – bonds and stocks with bond like profiles like utilities may be getting the boot!

Here’s why – market participants carefully to Central Bank’s indicating less liquidity and stimulus could be in the cards. Bonds that had rallied to near negative rates have reversed, and rates here in the US have started to pick up to the upside.

This could be the beginning of an epic shift out of bonds, and I’ll have more on that in a future piece, but for now rest easy knowing that we’re not at the end of our expansionary cycle, in fact it’s just getting a new and welcome driving forces.

Outside of a black swan or political derailment, that’s enough to continue stock buying.

And, before I let you go – here’s a list of our highest rated stocks domiciled in the Eurozone to help start your search.

Note, not all of the companies are pure plays on Europe as they may be doing business globally and are also affected by additional dynamics, so I encourage you to go use this as a starting point rather than an endpoint.

One thing is for sure, the performance is there, and the proof (growth) is there, so we’ll benefit stateside, but don’t be afraid to use our Ratings and look outside of our boundaries for the best way to play.

Best,

Mandeep

Small Cap Edition, By Mandeep Rai, Senior Analyst Mandeep Rai has more than 15 years of investing experience, working as both a stock and credit analyst. At Weiss Ratings, he researches and evaluates financial and economic themes, and makes decisions on when to buy or sell specific shares for the Top Stocks Under $10 portfolio.