## Can European Stock Indices Maintain Their Upward Momentum in 2024? Market Opportunities and Risks Coexist
Since the beginning of 2024, European stock markets have demonstrated strong performance. Germany's DAX index has risen nearly 10% year-to-date, France's CAC 40 has climbed 8.29%, and the STOXX 600, which covers 90% of listed company market capitalization in Europe, has recorded gains of 6.88%. Notably, the STOXX 600 index achieved a record performance in the first quarter. What investment logic lies behind this rally?
### Three Major Driving Forces Behind Capital Inflows into European Stocks
**Valuation Valley Effect**
US and European stocks present a striking contrast. The S&P 500's forward price-to-earnings ratio stands at 19 times, while European stocks overall are valued at approximately 14 times. This means investors can purchase cheaper assets in Europe with the same amount of money. In the fourth quarter of last year, funds focused on European stocks attracted €45.7 billion in capital inflows, with year-over-year growth exceeding 45%, indicating investors are shifting their attention westward.
**Inflation Peaked, Rate-Cut Expectations Rise**
Eurozone inflation declined from 2.8% in January to 2.6% in February, falling for three consecutive months and breaking below the 3% alert line. Market consensus expects the ECB to initiate a rate-cut cycle within 2024. Bank of America's survey shows that professional investors made net purchases of European stocks in February, with rate-cut expectations driving capital inflows.
**Corporate Profit Recovery**
Multiple investment banks are optimistic about profitability prospects for European listed companies. Citi predicts 3% earnings per share growth for European stocks in 2024, while Goldman Sachs expects profit growth of 7%. A lower interest rate environment combined with corporate profit recovery forms a dual engine supporting upward stock market movement.
### Thirty Years of Ups and Downs in European Stock Indices
To understand current markets, one must review history. The STOXX 600, as Europe's most representative stock index, covers multiple industries including finance, technology, and healthcare. Over the past thirty years, this index has experienced several dramatic cycles.
During the 1990s, European economies grew rapidly, ushering in a golden period for stock markets. However, the 1997 Asian financial crisis and the subsequent Russian crisis disrupted this prosperity, causing European stocks to plummet. Entering the millennium era, the internet bubble pushed various tech stocks to absurd valuations, and the 2000-2001 adjust ment resulted in heavy losses for investors.
Following the September 11 terrorist attacks, European stock markets underwent years of recovery. China's entry into the WTO, global trade expansion, and central banks maintaining low interest rate policies all jointly propelled European stocks higher. However, the 2008 global financial crisis completely transformed this scenario. The Lehman Brothers bankruptcy triggered a chain reaction, followed by Europe's sovereign debt crisis, with Greece, Ireland, and Portugal severely impacted. Europe's economy fell into recession.
The ECB and governments' quantitative easing policies ultimately stabilized the situation, initiating a new phase of recovery for European stocks. The 2020 COVID-19 pandemic briefly impacted markets, but government rescue measures and central bank expansionary policies quickly reversed the situation, with European stocks subsequently rallying strongly.
### Three Strongest Sectors in European Stocks in 2024
Over the past year, three sectors have led European stock gains.
European industry encompasses aviation, manufacturing, and construction. Airbus, as a global aviation giant, has benefited from Boeing's continued safety issues, sending its stock soaring. However, the stock's P/E ratio has risen to a near five-year high of 35.60 times, presenting valuation risks. Technically, if the stock pulls back, support lies around 136 euros. Current RSI index above 70 indicates short-term overheating, requiring investors to monitor adjustment pressure closely.
**Information Technology: Software Service Providers Drive Innovation**
Germany's SAP, France's Capgemini, and UK's Arm lead Europe's IT industry. Last year, this sector gained 19%. Taking SAP as an example, its stock price has broken above the upper limit of a medium-term and long-term rising channel, suggesting the uptrend may accelerate. However, the stock's P/E ratio of 56.39 times has reached a ten-year high, with relatively significant short-term adjustment pressure, with support around 121 euros. RSI indicators show negative divergence with price, signaling downside risks.
**Discretionary Consumer: Consumer Goods and Retail Opportunities Abound**
LVMH, Pandora, and other consumer brands hold prominent positions in global markets. Taking Pandora as an example, despite drag from the Chinese market, global revenue grew 6% year-over-year in 2023, with organic revenue growth of 8%, exceeding market expectations. Stock prices soared more than 90% last year, but due to excessive gains, short-term adjustment pressure exists, with the stock currently testing resistance at 1160 krone.
### Three Pathways for Taiwanese Investors to Enter European Stock Indices
**Direct Trading through Brokers**
This is the most direct approach. Investors can flexibly set market orders, limit orders, stop-loss orders, etc., and gain complete stock ownership, voting rights, and dividend rights. Disadvantages include higher trading costs; purchasing multiple stocks incurs substantial commissions, and most brokers offer limited leverage, reducing capital efficiency.
**Indirect Layout via ETFs**
For cost-conscious investors, ETFs are an ideal choice. Mainstream options include Vanguard FTSE Europe (expense ratio 0.09%, assets $14.8 billion) and iShares Core MSCI Europe (expense ratio 0.09%, assets $4.197 billion), providing a convenient low-cost path to track European stocks.
**Leveraging Contracts for Difference (CFD) to Amplify Returns**
CFD trading allows investors, through margin mechanisms, to establish positions by paying only a fraction of contract value, achieving capital leverage amplification. CFD simultaneously supports two-way trading, allowing investors to go long when bullish or short when bearish, flexibly responding to market changes. This approach requires investors to possess strong risk management capabilities.
### European Stock Outlook for Second Half: Opportunities Outweigh Risks
Looking at the remainder of 2024, both positive and negative factors coexist.
**Supporting Factors: Three Sources of Confidence**
Eurozone inflation continues declining, with ECB rate-cut expectations becoming market consensus. Corporate profit guidance is optimistic, with multiple investment banks raising full-year expectations. Compared to US stocks, European stocks remain attractively valued, providing momentum for continued capital inflows.
**Risk Factors: Three Concerns**
Continental European governments are gradually phasing out energy subsidies, with post-pandemic fiscal normalization measures potentially suppressing growth in energy, logistics, and other industries. Eurozone economic expectations have been revised downward from 1% to 0.5%, indicating weak macroeconomic fundamentals. The Russia-Ukraine war enters its third year, with geopolitical risks continuing to loom.
Because negative factors are relatively controllable and predictable, ECB rate cuts and overall European stock index valuation advantages are expected to continue attracting capital inflows. Investors should continuously monitor second-half trading opportunities while preparing psychologically for market volatility. Although European stocks have already appreciated significantly, they remain worthy of long-term attention due to fundamental support and valuation attractiveness.
### Conclusion
European stock markets are composed of various national capital markets, each with unique characteristics and attributes. As a highly economically integrated community, European markets often exhibit similar features. Throughout historical development, European stocks have weathered bubble bursts, financial crises, and debt crises multiple times, each time emerging from the ashes. The 2024 European stock rally continues the momentum from the previous year. Investors should seize the window of valuation advantage and favorable policies while remaining vigilant about short-term adjustment risks. For investors interested in positioning in European stock indices, now is an opportune time to assess opportunities and formulate strategies.
## Can European Stock Indices Maintain Their Upward Momentum in 2024? Market Opportunities and Risks Coexist
Since the beginning of 2024, European stock markets have demonstrated strong performance. Germany's DAX index has risen nearly 10% year-to-date, France's CAC 40 has climbed 8.29%, and the STOXX 600, which covers 90% of listed company market capitalization in Europe, has recorded gains of 6.88%. Notably, the STOXX 600 index achieved a record performance in the first quarter. What investment logic lies behind this rally?
### Three Major Driving Forces Behind Capital Inflows into European Stocks
**Valuation Valley Effect**
US and European stocks present a striking contrast. The S&P 500's forward price-to-earnings ratio stands at 19 times, while European stocks overall are valued at approximately 14 times. This means investors can purchase cheaper assets in Europe with the same amount of money. In the fourth quarter of last year, funds focused on European stocks attracted €45.7 billion in capital inflows, with year-over-year growth exceeding 45%, indicating investors are shifting their attention westward.
**Inflation Peaked, Rate-Cut Expectations Rise**
Eurozone inflation declined from 2.8% in January to 2.6% in February, falling for three consecutive months and breaking below the 3% alert line. Market consensus expects the ECB to initiate a rate-cut cycle within 2024. Bank of America's survey shows that professional investors made net purchases of European stocks in February, with rate-cut expectations driving capital inflows.
**Corporate Profit Recovery**
Multiple investment banks are optimistic about profitability prospects for European listed companies. Citi predicts 3% earnings per share growth for European stocks in 2024, while Goldman Sachs expects profit growth of 7%. A lower interest rate environment combined with corporate profit recovery forms a dual engine supporting upward stock market movement.
### Thirty Years of Ups and Downs in European Stock Indices
To understand current markets, one must review history. The STOXX 600, as Europe's most representative stock index, covers multiple industries including finance, technology, and healthcare. Over the past thirty years, this index has experienced several dramatic cycles.
During the 1990s, European economies grew rapidly, ushering in a golden period for stock markets. However, the 1997 Asian financial crisis and the subsequent Russian crisis disrupted this prosperity, causing European stocks to plummet. Entering the millennium era, the internet bubble pushed various tech stocks to absurd valuations, and the 2000-2001 adjust ment resulted in heavy losses for investors.
Following the September 11 terrorist attacks, European stock markets underwent years of recovery. China's entry into the WTO, global trade expansion, and central banks maintaining low interest rate policies all jointly propelled European stocks higher. However, the 2008 global financial crisis completely transformed this scenario. The Lehman Brothers bankruptcy triggered a chain reaction, followed by Europe's sovereign debt crisis, with Greece, Ireland, and Portugal severely impacted. Europe's economy fell into recession.
The ECB and governments' quantitative easing policies ultimately stabilized the situation, initiating a new phase of recovery for European stocks. The 2020 COVID-19 pandemic briefly impacted markets, but government rescue measures and central bank expansionary policies quickly reversed the situation, with European stocks subsequently rallying strongly.
### Three Strongest Sectors in European Stocks in 2024
Over the past year, three sectors have led European stock gains.
**Industrial Production: Aviation Leader Drives Overall Growth**
European industry encompasses aviation, manufacturing, and construction. Airbus, as a global aviation giant, has benefited from Boeing's continued safety issues, sending its stock soaring. However, the stock's P/E ratio has risen to a near five-year high of 35.60 times, presenting valuation risks. Technically, if the stock pulls back, support lies around 136 euros. Current RSI index above 70 indicates short-term overheating, requiring investors to monitor adjustment pressure closely.
**Information Technology: Software Service Providers Drive Innovation**
Germany's SAP, France's Capgemini, and UK's Arm lead Europe's IT industry. Last year, this sector gained 19%. Taking SAP as an example, its stock price has broken above the upper limit of a medium-term and long-term rising channel, suggesting the uptrend may accelerate. However, the stock's P/E ratio of 56.39 times has reached a ten-year high, with relatively significant short-term adjustment pressure, with support around 121 euros. RSI indicators show negative divergence with price, signaling downside risks.
**Discretionary Consumer: Consumer Goods and Retail Opportunities Abound**
LVMH, Pandora, and other consumer brands hold prominent positions in global markets. Taking Pandora as an example, despite drag from the Chinese market, global revenue grew 6% year-over-year in 2023, with organic revenue growth of 8%, exceeding market expectations. Stock prices soared more than 90% last year, but due to excessive gains, short-term adjustment pressure exists, with the stock currently testing resistance at 1160 krone.
### Three Pathways for Taiwanese Investors to Enter European Stock Indices
**Direct Trading through Brokers**
This is the most direct approach. Investors can flexibly set market orders, limit orders, stop-loss orders, etc., and gain complete stock ownership, voting rights, and dividend rights. Disadvantages include higher trading costs; purchasing multiple stocks incurs substantial commissions, and most brokers offer limited leverage, reducing capital efficiency.
**Indirect Layout via ETFs**
For cost-conscious investors, ETFs are an ideal choice. Mainstream options include Vanguard FTSE Europe (expense ratio 0.09%, assets $14.8 billion) and iShares Core MSCI Europe (expense ratio 0.09%, assets $4.197 billion), providing a convenient low-cost path to track European stocks.
**Leveraging Contracts for Difference (CFD) to Amplify Returns**
CFD trading allows investors, through margin mechanisms, to establish positions by paying only a fraction of contract value, achieving capital leverage amplification. CFD simultaneously supports two-way trading, allowing investors to go long when bullish or short when bearish, flexibly responding to market changes. This approach requires investors to possess strong risk management capabilities.
### European Stock Outlook for Second Half: Opportunities Outweigh Risks
Looking at the remainder of 2024, both positive and negative factors coexist.
**Supporting Factors: Three Sources of Confidence**
Eurozone inflation continues declining, with ECB rate-cut expectations becoming market consensus. Corporate profit guidance is optimistic, with multiple investment banks raising full-year expectations. Compared to US stocks, European stocks remain attractively valued, providing momentum for continued capital inflows.
**Risk Factors: Three Concerns**
Continental European governments are gradually phasing out energy subsidies, with post-pandemic fiscal normalization measures potentially suppressing growth in energy, logistics, and other industries. Eurozone economic expectations have been revised downward from 1% to 0.5%, indicating weak macroeconomic fundamentals. The Russia-Ukraine war enters its third year, with geopolitical risks continuing to loom.
**Overall Assessment: Maintain Moderately Bullish Stance**
Because negative factors are relatively controllable and predictable, ECB rate cuts and overall European stock index valuation advantages are expected to continue attracting capital inflows. Investors should continuously monitor second-half trading opportunities while preparing psychologically for market volatility. Although European stocks have already appreciated significantly, they remain worthy of long-term attention due to fundamental support and valuation attractiveness.
### Conclusion
European stock markets are composed of various national capital markets, each with unique characteristics and attributes. As a highly economically integrated community, European markets often exhibit similar features. Throughout historical development, European stocks have weathered bubble bursts, financial crises, and debt crises multiple times, each time emerging from the ashes. The 2024 European stock rally continues the momentum from the previous year. Investors should seize the window of valuation advantage and favorable policies while remaining vigilant about short-term adjustment risks. For investors interested in positioning in European stock indices, now is an opportune time to assess opportunities and formulate strategies.