Don’t dismiss a pronounced correction of markets

The second factor (i.e. the central banks’ “unconditional” support to the developed economies) was also decisive for the European stock exchanges to maintain the positive trend despite the fact that the economy in the Eurozone has not yet reactivated. There are some countries in which the improvement is quite clear, whereas in others –such as France, there are clear evidence of stagnation. It is even feasible that the French GDP will show a new contraction in the next quarter.

Therefore, the good performance of the European equity for the last quarters is due to the ECB’s constant support of the area economy and to the lack of investment alternatives (because of expansionary monetary policies that have lowered the official interest rates to historical minimums close to zero).

As long as the ECB keeps on supporting the economy, it will  be complicated to see a pronounced correction of these markets –save possible negative surprises that might lead to a new recession in the Eurozone, which would show the ECB’s inability to boost growth.

According to experts at Link Securities, this possibility is unlikely, but it shouldn’t be completely dismissed.