Buy Europe’s Unloved Banks While They’re Cheap

In the years I was a financial journalist, it always surprised me how reluctant many of us are to invest outside our country’s borders.

But with the U.S. stock market at all-time highs — and at stretched value levels not seen since 1929 and 1999 — there’s never been a more important time to diversify your profits from stocks outside America’s borders.

European stocks, for instance.

I’ve been a bull on European stocks since April last year when I called it the “economic Cinderella story of 2017.” I bet that the region’s consumers, as well as its troubled banking sector, would surely benefit from an upturn in confidence and eventually higher interest rates too.

Looks like I was right. Recent data from the European Union shows economic confidence across the euro zone hit its highest level in 17 years.

And when the EU reports its quarterly and annual gross domestic product later this month, the eurozone may well have grown even faster than the U.S. during 2017. An analytics firm called Capital Economics predicts the eurozone grew by 2.4% last year, compared to a U.S. forecast of 2.3%.

But while the U.S. is already on the road toward higher interest rates — a boon for bankers, credit card companies and savers everywhere — Europe is still fumbling to get its map out of the glove compartment.

Europe’s Economy Is on a Tear

The European Central Bank (ECB) said in December it would keep the euro zone’s interest rates at essentially zero.

The ECB’s president isn’t exactly a hawk on monetary policy. But we’re already seeing plenty of hints that the ECB may start signaling a change in its inflation stance from, let’s say, “more dovish” to “less dovish.”

And since rising rates make a currency more attractive to hold, the news was enough to strengthen the euro to its highest level versus the dollar in four years.

The point is, Europe’s economy is on a tear.

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