With Election Turmoil Over, Is Europe Safe To Buy Again? (VGK)

From David Dutkewych: Some of Europe’s highly contentious elections have passed. And the political elites in Brussels are breathing a sigh of relief.

But did these elections really change anything?

Not in my book: The European Union was already on a path toward destruction. And the election results haven’t changed a thing … not one iota.

Let’s not forget: The Europeans built the union on a foundation of mud, doomed to fail from the very beginning.

First off, the EU countries have big differences in language, religion, and culture. And big differences in standards of living from one country to the next.

And the reality is – as history has proven time and time again – artificial political constructs never last.

The EU may be great for the political elites in Brussels. But it’s not so great for the average citizens, especially in countries like Greece and Italy. As a result, those kinds of social welfare states simply can’t be sustained any longer.

And economically, the news keeps getting worse. In fact, Europe is ground zero for a coming debt-default disaster of epic proportions.

Just look at the debt-to-GDP ratios of some of the eurozone countries: Greece, Italy, Portugal, and Belgium all remain over 100 percent. Not good!

And Italy and Greece are flat broke: Their financial systems depend completely on money-printing by the European Central Bank (ECB).

In fact, just last week, ECB President Mario Draghi announced the central bank will hold interest rates at 0.0% and will extend its quantitative-easing program. Europe just can’t get the growth that it needs to shut down those printing presses.

To make matters worse, last week the U.K. electorate delivered a “hung Parliament” to Conservative Prime Minister Theresa May.

Now she must deal with a legislature controlled by the opposition Labour Party.

The “hung Parliament” creates more uncertainty surrounding the U.K.’s exit from the EU.

It will likely delay negotiations with the EU, increase the risk of a disorderly Brexit, and bring in a period of heightened political insecurity.

The Brexit negotiations were set to begin on Monday, June 19. But they might have to be postponed. And that means the U.K. may be staring at weaker growth as uncertainty increases.

In France, President Emmanuel Macron’s La Republique en Marche Party should win the Parliament by a landslide in this Sunday’s runoff elections.

But again, this does not change a thing. In fact, it gives France and the EU a sense of false hope. Macron’s idea of federalizing Europe will never happen.

Bottom line: The recent election results did not send the European Union on a path toward recovery. The fundamental flaws that have existed since the beginning still hold true today.

It’s not a matter of “if” the European Union will fail, it’s simply a matter of “when.” And The Edelson Institute cycle forecasts show the process is already in motion and should pick up steam next year, leading to an all-out disaster by 2020.

My recommendation: Stay away from European bonds – European governments have no intension of ever paying them back.

The money flow will continue leaving Europe and heading straight into U.S. equities. So, my best advice is to start buying high-quality U.S. stocks on the next market correction.

The Vanguard FTSE Europe ETF (NYSE:VGK) was trading at $56.28 per share on Monday morning, up $0.23 (+0.41%). Year-to-date, VGK has gained 17.40%, versus a 9.05% rise in the benchmark S&P 500 index during the same period.

VGK currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #2 of 90 ETFs in the European Equities ETFs category.


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