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Jump on the European Bandwagon

The PACER PERSPECTIVE
May 2017

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Jump on the European
Bandwagon

- Michael Mack, Portfolio Manager

The European stock market began to see improvement in 2016 as bank lending increased and earnings grew. US voters were nervous about their own economy in the wake of an unpredictable presidential election and may have missed the initial opportunity. With political uncertainty in the US no longer a major concern, now might be the time to weigh European investment risks like political uncertainty and currency exchange rate risk and hop on the European bandwagon.

 

Source: Bloomberg, FactSet
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. YOU CANNOT INVEST IN AN INDEX.
Earnings Per Share (EPS) is the portion of company’s profit allocated to each outstanding share of common stock.
Russell 1000 index is a US market-capitalization weighted index representing the top 1000 large-cap stocks in the Russell 3000 Index
FTSE Eurozone Index includes large- and mid-cap stocks in the developed markets of the Eurozone. It is a subset of the FTSE Global Equity Index Series (GEIS) which is designed to help investors benchmark European investments.

 


 


The combination of positive earnings growth and attractive valuations make Europe a compelling opportunity for investors looking to diversify their portfolios. As banks start to lend again and businesses begin to invest, economic growth is picking up. More than 9 years into a cycle favoring the US, we are well past the average of 4.7 years. When the cycle will change is unknown, but now might be a good time to consider Europe.

    MSCI Europe USA Years
12/31/1969 6/29/1973 50.96% 26.70% 3.50
6/29/1973 10/29/1976 -31.95% 13.17% 3.34
10/29/1976 12/29/1978 68.72% 4.07% 2.17
12/29/1978 10/29/1982 7.25% 71.27% 3.84
10/29/1982 11/30/1988 298.95% 160.40% 6.09
11/30/1988 1/29/1993 34.12% 83.81% 4.17
1/29/1993 6/30/1994 25.44% 5.47% 1.42
6/30/1994 1/31/2002 98.77% 190.62% 7.59
1/31/2002 11/30/2007 144.57% 45.57% 5.38
11/30/2007 3/31/2017 -3.87% 95.42% 9.34
      Average 4.73

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An ETF that aims to participate in the market when it is trending up, maintain some exposure during short-term market declines and move to 3-month US T-Bills when it is trending down.

 

 

 

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Uses a free cash flow yield screen and a dividend yield screen to invest in 100 companies from the FTSE Developed Large-Cap Index. It aims to provide a continuous stream of income and capital appreciation over time by screening for companies with a high free cash flow yield and a high dividend yield.
 

 

 

This document does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. Please consult with your financial advisor and tax advisor before investing.

This document is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. This document represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. The user of this information assumes the entire risk of any use made of the information provided herein.