Recall that the European Debt Crisis was a macro-level systematic shock that resulted in a broad market flight to safety and high inter-country correlations. European companies and countries sold off in tandem as Europe entered a recession and debt crisis. Conversely, all of Europe rallied as the financial system stabilized, regional economy bottomed and confidence returned. Now that the system in Europe has stabilized and a regional bounce back has occurred, we expect to see country level factors and stock specific risks lead returns higher and drive correlations lower from here.
Accordingly, a deeper dive, below the regional level, is necessary to take advantage of a wider range of country returns in the region. Our research and systematic “smart beta” country ranking process reveals high variation in country profiles and investment prospects. Not all of the countries in Europe are attractive. We see the full spectrum of momentum, valuations, risks, and fundamentals in the developed countries of Europe, and we advise a balanced, multi-factor, conviction weighted approach to the region.
This article was written by Accuvest Global Advisors, a California based RIA and sub-advisor of the AdvisorShares Accuvest Global Opportunities ETF (ACCU) and the AdvisorShares Accuvest Global Long Short ETF (AGLS), shares their thoughts on the Global Emerging Market.