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European Growth is Slowing, Quickly: Look Out Below

1 | By Shah Gilani

Growth across the European Union is slowing, quickly and dramatically. On top of that, Brexit looms.

For interest rates, the euro, European stock markets, and Eurozone banks, that means, look out below.

Something’s happening across Europe, and you need to be aware.

Things could get bad, and you need to know where to take cover.

Here’s what’s you need to know, and what you can do in the meantime to potentially profit…

A Technical Recession

Just when European Union GDP growth was starting to look good, increasing from 1.6% GDP growth in 2014, to 2% in 2015, 2.1% in 2016, and a healthy 2.7% growth rate in 2017, a sharp reversal looms.

Full-year 2018 GDP data won’t be officially out for another week, but preliminary fourth quarter 2018 numbers point to a rapid slowdown in growth with a recession looming in several Eurozone countries.

UBS bank analysts say they expected Q4 growth of 0.4% for the EU, but now they’re knocking down their estimates to zero growth, and possibly a small negative outcome for the last quarter of 2018.

While Spain’s GDP growth seems to be holding up, the other major EU economies aren’t carrying their weight.

Italy, which initially reported Q3 2018 growth of 0.8%, downgraded its forecast to negative 0.1% and expects Q4 to come in at negative 0.2%. Technically, two consecutive quarters of negative GDP growth constitutes a recession.

Germany, the European Union’s growth engine, reports Q4 and full-year 2018 GDP numbers on February 14, 2019. They’re not expected to be great, or even good.

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Tanja Mocha, who compiles numbers for Germany’s Federal Statistics Office, expressed some optimism, stating last week the Statistics Office “expects a small plus.”

That “small plus” comes on the heels of a noticeable slowdown. Overall for 2018, consensus estimates are for the German economy to have grown 1.5%. That’s down from 2017’s 2.5% growth rate.

Previously reported German growth for Q3 was recently adjusted down to negative 0.2%. If on February 14 Q4 GDP registers a small negative instead of a small plus, that would put Germany technically in recession.

Meanwhile, prospects for overall growth of the 19-nation bloc to come in at 0.2% for the fourth quarter, which would be the same as Q3, are diminishing and could turn negative once Germany’s adjusted numbers and Italy’s new negative growth adjustments are tallied.

Last week European Central Bank (ECB) president Mario Draghi, after announcing the ECB would keep rates at their current level, having ended bond purchases in the fourth quarter and anticipating moderate hikes sometime in the future, said risks to the growth outlook were now “more to the downside.”

The European Union, potentially descending into recession with unexpected speed, could trigger a series of selloffs.

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Interest rates would have to come down further. The euro would take a hit. And European equities would tumble.

Worst of all, European banks, already in bad shape, holding hundreds of billions of euros worth of bad loans and each other’s debt securities, are at risk of failing.

The safest place to be if Europe descends into a crisis is in U.S. Treasuries and U.S. equities.

I’ll be back next week with more on how bad European banks are – and more on where to park your money.

Until then, what I can give you is this:

Something priceless is hidden beneath the market’s third dimension.

I know it sounds nuts, and before you start saying something about The Matrix movies, hear me out.

One of my good friends and colleagues, Money Morning Chief Investment Strategist Keith Fitz-Gerald, has a way to look past the stock charts we see every day – think of what you see on Yahoo! Finance, for instance.

That’s a 2D chart – flat, boring.

But what Keith has done enables him to see beyond the two-dimensional charts we’re faced with every day, and in the third dimension, stock charts can look almost unrecognizable.

Why? Because 3D stock charts reveal something never before seen – the “true” price of a stock.

And when you know the “true” price of a stock… the profit potential shoots from ho-hum to insane potential windfalls of six-figures – upwards of $240,000 on any stock Keith can see.

You have to see this to believe it.

Click here for details.

Sincerely,

Shah

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