Taps Coogan – September 28th, 2021

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Despite the continuing levitation of European stocks, underlying Eurozone economic fundamentals are quickly weakening, as the following chart of the Citi Euro Economic Surprise index shows via Andraes Dagasan highlights.

The Economic Surprise index measures how incoming economic data performs relative to consensus expectations. As the chart above highlights, reality is now significantly underperforming expectations for the first time since the initial round of lockdowns last year.

There is nothing necessarily apocalyptic about a negative reading in this index. However, the increasingly arthritic Eurozone economy, which has been slowing for years amid high taxes and byzantine regulations, only got the briefest bounce after the initial Covid lockdowns last year. Given that the Eurozone’s working age population peaked all the way back in 2009, and given the bleak outlook for pro-growth economic reform, the block’s slow slide to irrelevance has likely resumed.

Fortunately for ‘investors,’ stock prices disconnected from fundamentals years ago thanks to endless QE. So, don’t expect any of this to matter to power brokers and policy makers.

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