REPOST: European markets are cheap – here’s how to invest (The Telegraph)

Europe’s current political climate is making quality stocks relatively affordable. Is now the best time to invest in this region? Know more from this article published on The Telegraph.

The forthcoming French election is one event scaring off investors

After what some have termed a “lost decade” economically, Europe now offers a potential bargain to investors willing to look through the political turmoil.

When the financial crisis hit, European markets fell to valuations cheaper than those in the US, and since then the American recovery has been stronger. The MSCI USA index has returned 82pc in five years in dollar terms, versus 28pc for the MSCI  Europe index – in pounds it’s 135pc to 64pc.

This performance has driven up valuations of American stocks while Europe now looks comparatively cheap on the basis of its “Cape” score – a popular valuation metric that compares share prices with average earnings over 10 years.

The US market has a Cape score (or “cyclically adjusted price to earnings ratio”) of 28, compared with 17 for developed European countries and eight for their less developed counterparts, according to Star Capital, a German investment firm.

Bill McQuaker, a multi-asset fund manager at Fidelity, said this disparity represented an anomaly relative to historic norms.

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