Eurozone Valuations Outpace GDP Growth

November 21, 2013 | Tom Salemy, CFA, CAIA, Managing Director

This week’s Chart of the Week examines GDP growth and valuation levels in the eurozone. The chart above depicts eurozone quarterly GDP growth compared to both the prior quarter and year. As the chart shows, eurozone GDP growth is at very low or even negative levels. Growth versus the prior year has been negative since the first quarter of 2012, while growth versus the prior quarter only recently turned positive (albeit very slow at .26%) in the second quarter of 2013.

The eurozone GDP growth or lack thereof does not seem to accurately correspond to eurozone valuation levels. As seen in the chart, the eurozone’s P/E ratio has continued to increase over the past 8 quarters despite little to no growth. The P/E ratio was 14.5 at the end of the fourth quarter of 2011. Since then, the P/E ratio has climbed to 21.6 on speculation that Europe will experience a strong recovery. However, despite continued investor optimism, the main question still remains: will the European recovery truly come to fruition?

Tom Salemy, CFA, CAIA
Managing Director

Get to Know Tom

Related Content

07.28.2020

Bond Downgrades Subsiding

As a key indicator that we have come a long way from the late-March panic and that both the economy…

07.24.2020

Mounting Bankruptcies Reflect New Consumption Patterns

COVID-19 has caused a slew of bankruptcies across multiple industries as companies struggle to meet their cash needs. Re-openings might…

07.23.2020

2020 Halftime Market Insights Video

This video features an in-depth analysis of the second quarter’s performance and coincides with our 2Q Asset…

07.21.2020

Second Quarter Review of Asset Allocation: Risks and Opportunities

The second quarter of 2020 proved to be as eventful as the first, with slow economic results being largely ignored…

07.15.2020

Coastal COVID: Diverging State Responses

Nearly a month into summer, the tragedy of COVID-19 rages on globally and in the U.S. As of July 13th,…

07.09.2020

Best Historical Performing Asset Class Is on Sale!

It is critical for institutional investors to understand the importance of both relative and absolute value when considering investment allocations….

More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >