Investors’ view of the euro-zone economy is now too negative

Admittedly, cyclical indicators are poor and the euro-zone economy has been weakened by the global decline in demand for industrial equipment goods and cars, but growth in the zone is likely to remain quite good in 2019 thanks to the expansionary fiscal and monetary policies and the fall in inflation . This is not what domestic and foreign investors in the euro zone believe. Their preference for risk-free bonds and their rejection of European equities show that they expect a marked deterioration in the euro zone’s economic situation. These expectations are therefore likely to correct, which would lead to a n upturn in euro-zone long-term interest rates and share prices.