Presentation on theme: "Eurozone Renaissance? 30 January 2014 War Room. HiddenLevers War Room Open Q + A Macro Coaching Archived webinars CE Credit Idea Generation Presentation."— Presentation transcript:
Eurozone - Overview Eurozone = second biggest economy Eurozone population = 330 million Unemployed population = 20 million France + Germany + Italy + Spain = Historically 75% of Eurozone economy 2 330m 20m 75 sources: HiddenLevers, Wikipedia
Europe – Historical Scenario Overview Two Euro Crisis Periods: Nov 2009 – June 2010 Oct 2011 – July 2012 The 2011/2012 cycle ended with Greek default and bailout. Summer 2011 correction driven by other factors (US downgrade etc) Euro Crisis I Euro Crisis II: Greek Default The Greek default impacted the Euro and commodities, but little S&P downside
Europe Macro Picture: Unemployment sources: Eurostat, Deutsche WelleEurostatDeutsche Welle Youth unemployment exceeds 50% in Spain, Greece, and Hungary, and exceeds 25% in most of the EU. Japan USA EU Euro Zone Euro Zone unemployment is still over 12%, and significantly higher than the broader EU, United States, and Japan.
Europe Macro Picture: GDP + Currencies Germany recovered strongly from financial crisis, but recent growth on par with France (in dumpster) UK is accelerating, 2.8% Q4 2013 is almost on par with US Despite growth weakness, major EU currencies outperformed USD in 2013 And demand is flat. source: HiddenLevers
Europe – Market Activity The S&P 500 has outperformed all major European markets since 2009. Germany’s DAX kept pace with S&P in 2013, while France (CAC 40) and UK (FTSE 100) lagged behind. source: HiddenLevers
Europe – Focus on PIIGS Unemployment stuck at 20% + for years Spain Housing still falling into 2015 2014 = turnaround year for trouble makers PIIGS ETFs have high volatility source: HiddenLevers, Zero Hedge, Reuters, Irish Times, CBC News, Economist, Economist Data CenterZero HedgeReutersIrish TimesCBC NewsEconomistEconomist Data Center 2014 expected GDP2013 Performance Portugal+ 0.8%n/a Italy+ 0.7%EWI+ 26% Ireland+ 2.1%EIRL+ 42% Greece+ 0.6%GREK+ 26% Spain+ 1.0%EWP+ 29% Eurozone+ 1.4%IEV+ 22% PIIGS GDP as % of Eurozone GDP
Europe – Comparison to USA source: HiddenLevers, Guardian UK, Financial Times, Forbes, Country Economy, EurostatHiddenLeversGuardian UKFinancial Times ForbesCountry EconomyEurostat 5y chart – Europe Markets recovery lags US double-dip + severity record level unemployment brutal fiscal tightening no decision-maker accountability political agendas poor corporate credit Recovery Comparison USAEurozone 2008- 0.3%+ 0.4% 2009- 2.8%- 4.4% 2010+ 2.5%+ 2.0% 2011+ 1.8%+ 1.6% 2012+ 2.8%- 0.7% 2013+ 1.9%- 0.4% 2014 (exp)+ 2.8%+ 1.4% What prevents US style bounce back in Eurozone? 114% 28%
Eurozone GDP clinging to positive EU won’t repeat US comeback PIIGS in healthier place Europe Renaissance? – Recap Greek default = correct analogue
Good: Bona Fide Recovery source: HiddenLevers, Reuters, Irish Times, CBC News, Economist,ReutersIrish TimesCBC NewsEconomist EU equities + Economy both catch up to USA No countries in depression No removal of stimulus by ECB Margins rising as EUR rises PIIGS must participate Monetary policy is now supportive
Mild: Recovery amidst US Correction PIIGS need not participate source: HiddenLevers Europe Currencies + Markets rising, US not so much USA risk back on table, no US boost Germany + France playing catch up Markets Recovery NOT Economic Recovery
Bad: Euro Trashed No abatement in debt + austerity source: HiddenLevers, Guardian UK, Wall Street JournalGuardian UKWall Street Journal Still many skeletons in EUR closet Default in Euro Zone still possible EU banks counterparty risk comes to fruition outlier scenario political regime changes in Germany Merkel re-elected, Sept 2013
Scenario: Eurozone Renaissance? Good Bona Fide Recovery Mild Recovery Amidst US Correction Bad Euro Trashed European growth accelerates, adding to global recovery and boosting US markets. European equity markets play catch-up, but real growth is slow, with no carry- over benefit to US. German politics or other black swan enables debt crisis to come back into play
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