The Swiss Nation Bank hasn’t been given the credit that they deserve. It is likely that their decision to let their currency float freely on January 15, 2015 will mark the turning point for the European economy. It was quite a shock to the currency markets for a couple of days that’s for sure. Since that day the Euro has declined by another 4% vs. the dollar. This is in addition to the 16% decline since the beginning of 2014 thru January 14th, 2015. This was probably not the intention of the Swiss National Bank, but they effectively provided a quantitative easing that just might pull Europe out of its economic malaise. A currency devaluation is exactly what Europe needed to provide a growth engine (i.e. exports since their goods will be cheaper to their trading partners) that they so desperately need. The European stock market index (Euronext 100) is up almost 11% since January 14th which signals that investors are seeing greater growth potential for European companies. When you consider the added jolt of quantitative easing that the ECB is throwing in with their promise to buy over 1 trillion euros of European bonds, it will be interesting to see if a recovery in Europe begins to take hold over the next several months. If this level of QE doesn’t work for Europe there might be another lost decade (think Japan) on deck.
Jenifer Aronson is the Founder of Mosaic Fi.