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Top Trade Idea 2020: Long European Equities on Fiscal Stimulus Prospects

In the twilight of 2019, the Eurozone economy saw its annual growth forecast slip to the lowest since 2013 after flirting with stagnation for months, but rounded out the year with a comfortably positive return nonetheless. Amidst the courtship, the European Central Bank – under Mario Draghi – offered a rescue package of lower interest rates and bond purchases to stoke the zone’s economy. Evidently the economic impact of the monetary stimulus was less than stellar, which left the new ECB head – Christine Lagarde – with few options at her disposal.

DAX 30 Weekly Price Chart (2010 – 2019) (Chart 1)

DAX30 Weekly Price Chart

Effectively backed into a corner by persistently sluggish growth and ineffective monetary policy, Mrs. Lagarde has hinted at fiscal reform – particularly in Germany – as a method of kick-starting the European economy once more. Simultaneously, she offered little indication further monetary accommodation is off the table, which could see European equities, led by the DAX, outperform other areas in 2020 if fiscal stimulus takes shape and translates to real economic growth.

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–Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

https://www.dailyfx.com/forex/fundamental/forecast/weekly/title/2019/12/31/Top-Trade-Idea-2020-Long-European-Equities-on-Fiscal-Stimulus-Prospects.html

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