about 4 years ago • 2 mins
2019’s been a tough year for the eurozone economy. And while people will shortly be wishing one another a happy new year, good fortune is unlikely to prevail in Europe…
Economic growth in the eurozone started the year on a high but drastically deteriorated as the months wore on. The region's now struggling to grow by even 1% versus a year before.
Manufacturing was the biggest culprit, and eventually the rot spread to the services sector too. Germany – the eurozone’s biggest economy – bore the brunt of the slowdown as manufacturing represents about 20% of its output.
The main reasons for the slowdown were geopolitical. The US-China trade war hit the eurozone hard (a third of the bloc’s economy depends on China). And the stagnation of business investment as a result of Brexit uncertainty weighed on growth.
The European Central Bank probably won’t work any miracles, but the recent 1914-style truce in the US-China trade war might help Europe. And so might more certainty around the UK’s future relationship with Europe, since Brexit’s already cost both continent and country.
An economically catastrophic “no-deal” Brexit is off the table, as is the UK remaining in the European Union. But without clarity on the nature of the UK and EU’s future relationship, the effect of Brexit on the bloc could still wind up being either positive or negative, making it hard for investors to figure out where to put their cash.
The economy, however, isn’t the stock market – and Europe’s has just had one of its best years ever, rising 25% despite the weakening backdrop. Our Portfolio Construction Pack can help you balance risk and reward in your European 2020 investments, while our Stock Picking Pack will show you how investors assess which companies might be worth backing regardless of economic machinations. And our Pack on How To Value Stocks might just help you unearth underpriced gems and avoid expensive flops. Happy Christmas! 🎅
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