What I Learned This Week

As Europe approaches an important turning point, equity relative strength appears to be forming a base. Could E.U. stocks be the surprise performers of 2019?

With the ECB announcing the end of QE, and the Fed in the process of reducing its balance sheet, there will be substantially less free money available to drive the valuations on U.S. stocks. Meanwhile, some of the uncertainty that has riled E.U. markets in recent months is starting to subside. Consider the following: Italy’s 10-year government bond yield fell below 3% for the first time since September after a government official said that the proposed budget deficit would be revised from 2.4% to 2%, which would be more in line with E.U. demands. Ten-year yields have now fallen more than 60 basis points from their highs in mid-October, indicating that markets believe the worst of the unc…

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