“The stock MARKET is not the economy” might be a cliché, but it is still jarring to see quite how far the two can part ways. Surely economic growth should be good for shareholders? Yet study after study has suggested the opposite. One by Jay Ritter of the University of Florida, for instance, compared the returns on 16 countries’ stock markets with their GDP growth per person between 1900 and 2002. The two appeared, if anything, to be negatively correlated—meaning that the faster a country became richer, the worse its investors tended to do.
Mr Ritter’s results are worth bearing in mind when contemplating some of the world’s most underloved shares. Brief flirtations aside, it has been a long time since Europe’s big markets have thrilled international investors, and there are no prizes for guessing why. The IMF reckons GDP growth in the euro area will be just 1.1% this year, compared with 1.8% for advanced economies the world over and 2.3% for America. Some of Europe’s peripheral and emerging bourses are buzzing; the mainstays are not.
