Experts from HSBC say investors should avoid European stocks. The geopolitical situation featuring the Russian military operation in Ukraine resulted in energy and food supply disruption. Meanwhile, the prices for major resources and products are growing rapidly.
Major central banks have nothing to do but take drastic measures and apply a more tightened monetary policy. Governments of all major European nations act aggressively seeking chances to take inflation under control.
In this situation, most companies from the EU trade their stocks at low prices. The asset value is lower than the financial fundamentals of the underlying company. This fact attracts more and more investors looking for valuable stock at low prices.
However, the situation is quite misleading. What seems a good investment opportunity can eventually turn into a financial trip with no chance to make good returns or recover losses in the long run. Experts from HSBC warn traders to avoid European stocks because of increasing interest rates and cheaper valuation.
Market participants are recommended to avoid allocating to European assets while chasing cheaper assets. We can see an emerging energy crisis that is only about to break out in winter. It means that the risk-reward ratio is not in investors’ favor.
In this situation, it is better to stick to the most reliable and trusted stocks or opt for some other assets that promise good returns in the long run, like gold, for example.
