How To Short Europe
You'd think it would be easier...
Between mounting debt, spreading political turmoil, and cratering birthrates, Europe is a long-term mess. But a short seller cares about the coming year, not the coming decade. So how reasonable is a bet that European stocks will head lower now?
Actually, it’s pretty reasonable. Continental equities have had a nice run since last October (the following chart shows Vanguard’s Europe ETF, which holds the shares of Europe’s largest companies). So just from a technical perspective, it might be time for a correction:
As for the fundamentals, European interest rates are high and rising, which is typically bad for stock prices. Google “European Central Bank tightening” and you’ll find a long list of stories quoting ECB officials threatening further rate increases if inflation doesn’t behave itself immediately. Which means it’s quite possible that the Continent’s vast indebtedness will collide with rising interest rates in the year ahead, producing a financial crisis and equities bear market.