But a funny thing happened on the way to that expectation -- it didn't happen. Well, at least not to the degree of pain and suffering that was expected.
On a related note, since the start of this quarter, Eurozone stocks have been tearing it up.
The S&P 500 is up a healthy 3% in the quarter, but the Euro STOXX 50 has almost quadrupled that gain, soaring by +11% and change. It's also interesting (and perhaps telling) to see the ETFs of two of the most decimated Eurozone countries, Italy and Spain, up 15% and 15.6% respectively, as compared to the equities of a much stronger Germany rising by "just" 8.7%. I say "perhaps telling" because very often before a recession ends, lower-quality tends to lead higher-quality and in this case, with the more fragile and precarious countries like Italy and Spain outperforming stalwart Germany, it could mean economic recovery in the region is for real and not just a temporal blip.
I think with Eurozone equities doing so well, esp. when compared to the U.S., this could very well be another case of prices moving before the news. It's fairly well known that stocks tend to discount recessions by roughly 6-12 months and it appears that here equities have done it again.
Of course, many dangers remain for the Eurozone and equities could simply be moving prematurely. However, as with my recent comments on Apple, during this quarter Euroland stocks have made outsized moves, exhibiting extreme momentum ("good overbought") that should have positive carry-over effects into the near future.
We will undoubtedly continue to read gloom-and-doom prognostications about the region and it's anyone's guess if they'll come true. I would just remind that at the start of 2009, with the world seemingly coming to an end financially, in large part due to a deeply in-debt and beyond-extended U.S. consumer, the last area most experts thought would do well over the next several years would be the consumer cyclical/discretionary sector. These stocks were deemed a no-brainer must-avoid.
Judging from the chart below, such stocks have not performed all that badly (!), in my mind putting together one of the most stellar periods of outperformance since tech stocks in 1999 to early 2000. Wow.