Europe’s sluggish recovery after the double-whammy from the global financial and sovereign debt crises has made it easy for investors to dismiss the region’s prospects. Yet absent a political or external shock, we believe the eurozone’s improving economic dynamics have longer to play out.
Room for improvement
Europe big-four GPS and market-implied GDP, 2010-2017
Sources: BlackRock Investment Institute, Eurostat, March 2017.
Notes: The chart shows the GDP-weighted average GPS for the eurozone's four biggest economies: Germany, France, Italy and Spain. The market-implied rate of eurozone GDP is based on a statistical model that analyses co-movements in eurozone equity prices and real bond yields: Any simultaneous rise in real yields and equities is interpreted as a positive growth expectation. That is converted into a reading for 12-month forward GDP expectations.
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