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

Line chart showing the personal savings rate and personal consumption amongst Americans. Chart subtitle: Personal savings rates have retreated from pandemic-induced highs, however several potential headwinds still face the American consumer this holiday season Chart description: Y-axis ranges from -15% to +30%. X-axis shows quarters from 3Q16 to 3Q21. Line for Personal Savings Rate is purple and line for Personal Consumption (Quarter-Over-Quarter Change) is dark green. Both lines were relatively steady up to 2Q20 as the coronavirus pandemic took hold of the economy. The Personal Savings Rate peaked in that quarter to 26.0% and the Consumption Rate Change decreased to the extremein 2Q20 then peaked the following quarter with a 10% increase. Both levels have returned to just slightly higher than normal levels in recent quarters. Chart source: Federal Reserve Bank of St. Louis as of September 30, 2021.

12.02.2021

‘Tis the Season for Consumer Spending?

The COVID-19 pandemic resulted in significant changes to, among a plethora of other things, consumer behavior in the United States….

11.29.2021

In Context Video: Is the 60/40 Portfolio Dead Forever?

In this video, the authors of our recent white paper discuss the 60/40 model portfolio —…

11.18.2021

Bulls on Parade: What’s Driving the 2021 Digital Asset Rally?

The first bitcoin futures ETF — the ProShares Bitcoin Strategy ETF — was approved on October 15th, making it easier…

Combination chart showing number of regulatory actions by the Chinese government (columns) and MSCI China Index cumulative returns (line) by month. Chart subtitle: In recent months, Chinese equities have been hampered by new regulations from Beijing authorities aimed at a variety of industries . Chart description: Left Y-axis shows Cumulative Return in percent of the MSCI China Index, from -20% to +15%. X-axis shows months from November 2020 to September 2021. Right Y-axis shows Number of Beijing Regulatory Actions from 0 to 35. The x-axis line is at the 0% mark for the Cumulative Return axis. Prior to this summer, the number of regulatory actions was very low, typically less than 5 per month in the data shown. In May 2021, there were 9 actions; June saw 3, then July had 14, August had 31, and September had 24. The MSCI China Index has struggled with this increase and has been negative each month since June. Chart Sources: Bloomberg, Cornerstone, and MFS; data as of September 30, 2021.

11.09.2021

China: Regulators, Mount Up!

Over the last year, the Chinese government has enacted a series of new regulations targeting several domestic industries including finance,…

11.04.2021

The More the Merrier?

A driving force for most investors seeking to add a private equity allocation to their portfolios is the strong performance…

Column chart showing stock indices performance during periods of rising inflation. Chart subtitle: U.S. stock indices have tended to rise during inflationary periods in the last several decades. Chart description: Y-axis shows annualized return, from -10% to 60%. X-axis shows seven periods of rising inflation (Jan 1979 - March 1980; Dec 1986 to Oct 1990; March 1998 to March 2000; June 2002 to July 2008; July 2009 to Sept 2011; Jan 2015 to July 2018; May 2020 to Sept 2021). Each stock index represented by a column: Russell 1000 Growth in blue, Russell 1000 Value in light blue, Russell Mid Cap Growth in purple, Russell Mid Cap Value light purple, Russell 2000 Growth in dark green, and Russell 2000 Value in green, CPI in dark gray. Almost all show positive returns. Chart source: Bloomberg; data as of September 30, 2021.

10.29.2021

Can Equities Provide a Hedge Against Inflation?

Inflation has been at the forefront of the minds of many investors in recent months as higher price levels have…

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 >