In fact, eurozone core inflation has been at that level since July, and headline inflation has been falling since May. With the region's Gross Domestic Product falling steadily since the second quarter of 2002, Europe's economic slowdown has become too pronounced to ignore. ECB action is terribly important. Typically, it takes 12-18 months for central bank easings to work their way into the economy. Given that the first of these easings came in the spring, we could start to see signs of recovery as soon as the second quarter.
Stocks tend to rally about six months ahead of an economic upturn.
So, if our outlook proves correct, now is the time for investors to get into foreign equities. The one caveat here is that we expect international markets to be fairly volatile in the near term. For that reason, investors may want to consider a dollar cost-averaging strategy in establishing or adding to a position. We also expect that investors will begin to recognize that despite the slowdown, Europe is still growing faster than any other major economic block. Our major reservation about Europe is the timing and magnitude of an earnings rebound.