By all accounts September has been a surprisingly great month for stocks, with the S&P 500 (^GSPC) up about 4.5% so far this month. Perhaps even more surprising is the fact that the gains in Europe have been even better, whether it's pan-European indexes like the EuroStoxx 50, the Dax, the CAC 40 or the MIB, stocks across the Atlantic are hot right now.
"It looks like a reasonable place to be, but don't get carried away," says Russ Koesterich, the chief investment strategist at BlackRock in the attached video. "There's still some significant headwinds in Europe from the banking sector, to the anemic pace of growth that suggests to us that you want to have some exposure in Europe but you don't want to be overweight this part of the world."
While the region's largest economic player has overwhelmingly re-elected Angela Merkel to a third term as Chancellor of Germany, the benefits of this embrace of stability appear to be fleeting or fully digested.
In a note to clients, SocGen fixed-income and currency strategist Kit Juckes writes, "The outcome leaves markets somewhat in limbo, despite positive headlines helping the Euro (hurting the dollar), and supporting both risk assets and peripheral European bonds... there seems little point chasing the Euro higher from here... we have gone nearly as far as we can."
For Koesterich, the concerns about the region are two-fold.Read More »from Merkel May Have Won but Europe Is Still Broken: BlackRock’s Koesterich