My colleagues noted the long list of issues confronting countries in the euro zone. In particular, European banks are still in a precarious position, holding billions of questionable euro zone credits mostly related to the real estate bubble that developed in countries like Spain during the last decade.
Friends and clients remain largely unconvinced as well. Pictures of riots in the streets of places like Athens and Barcelona are hardly confidence-inspiring.
And the election of the socialist candidate Francois Hollande in France over the weekend doesn't exactly excite the animal spirits of capitalist investors.
Yet I still think that a considerable amount of "bad news" is already priced into the European markets.
As I wrote last week, most of the stock markets in Europe are trading at the very low end of valuations over the last 10 years. Meanwhile, corporate earnings expectations for many European companies are being moved higher.
It's not only voters that are calling for a rejection of Germany's calls for austerity. Comments from several senior policy members in several European countries have now decided that growth, not cutbacks, are the way to stimulate Europe's moribund economies.
For example, here was an excerpt from this Saturday's Financial Times:
Senior European officials are championing an investment pact to stimulate growth in the eurozone as voters in France and Greece look set to punish leaders who have backed austerity measures.
In a marked shift of emphasis, Olli Rehn, the {European Union}'s top economic official, will today call for additional government spending for large-scale infrastructure projects, arguing that there is not sufficient private-sector demand to create jobs.
http://www.ft.com/home/us
So on top of a significant divergence between market valuation and company fundamentals, investors in Europe might also find significant fiscal stimulus helping corporate earnings in the coming quarters.
However, for now at least, I still face a number of euro-skeptics.
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