Recession fears make way for bearish market, yet EU stocks might yield more

Recession forces loom over global economy amid the ongoing trade war between US and China and on and off sparks between US and EU. The retaliatory moves between two of the world’s biggest economies got amplified last week. The tit-for-tat strategy dominated the round-table discussions, making global investors jittery.

Investors are moving towards safer options such as gold, government bonds and even cryptocurrency, after witnessing a major sell-out on Monday. Though after Tuesday markets are seemingly moving towards stability but investor anxiety is going to cause heavy capital outflows, leaving the entire world markets in bearish state.

But strategist speculate that European stocks might yield better results as compared to others, especially US, even in the economic slump. Reasons for the better performance of EU shares need to be viewed in relative terms.

Hubert de Barochez, markets economist at research consultancy Capital Economics told CNBC that ‘equities around the world will fall during the rest of this year’, slowing the global economy.

Barochez added that US stocks are particularly expected to go down, where as in ‘the euro zone, given that a lot of bad news seems to be already priced in’, equities would perform better.”

European economy runs majorly on exports. According to the capital economist the euro is expected to fall further against the dollar, which would boost European exports and thus inject more life in the currently gasping zone.

Lisa Shalett, Chief Investment Officer at Morgan Stangley pointed out that the US economic expectations and stock prices are already quite high, decreasing the scope for any further upward movement, while low expectations and fairly priced stocks in Europe hold great chance of showing ‘positive surprises’. Also, it would keep the capital investment in the European market, despite the current gloomy outlook.

Besides, European Central Bank has reacted swiftly to the economy slump by timely slashing the interest rates in correspondence to the market forces. The bank has even left the door open for further cuts, if need be. Where as Federal Reserve has made interest cut only recently, for the first time in a decade. It is unlikely that Fed would make another cut soon. It puts in more money in European market and consumer, while US economy would remain tight.

However, the ride ahead for both US and European markets seem equally topsy-turvy. But EU has already started to work on mitigating the impact recessive forces, while US is still oblivious to the fact that recession is just around the corner for it as well.

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