European equities are top of the class in the eyes of most asset allocators and fund sales have been buoyant, relative to most asset classes.
In 2015, the big allocation shift was an undisguised play on the launch of quantitative easing by the European Central Bank, and it worked spectacularly well. At least until mid-April. Looking at the chart below, it could be argued that the uplift from QE all came through in the first four months following the launch.
Fortunately for any investors who have got a lot invested in European stocks, an important difference this year is that there are other significant factors at play aside from a QE inspired flood of money.
Although the QE programme is continuing and could yet be increased further, there ultimately needs to be more than this to support a sustained rally.
The purchasing managers’ indices data released this week was very encouraging and has been leapt upon by some as a sign QE has kicked in and a broader recovery may take hold in eurozone countries during the coming couple of years.