European Market Trends Toward Hard Times Until It Figures Out Energy Deficit - US Investor

WASHINGTON (UrduPoint News / Sputnik - 13th September, 2022) The European market is trending toward harder times and the prospects for investment in the near term will remain "bombed out" until the region figures out the energy deficit and cost issue, the financial services firm Sovereign Wealth Management CEO Gary Korolev told Sputnik.

"The only positive near-term prospect for investing in Europe right now is that sentiment is so bombed out, the market usually looks for an opportunity for a countertrend rally at a time like this," Korolev said. "Otherwise, the trend is still toward harder times for Europe until they figure out the energy deficit/cost issue."

Korolev underscored that Europe will not be able to live without Russian energy but the region's economic engine, Germany, still plans to shut down its nuclear reactors despite massive energy problems.

"Nuclear is the only way to at least partially alleviate Europe's energy problems without the use of Russian gas," he said. "There is nowhere near enough compressed natural gas to go around and whatever can be delivered to Europe is at a much higher price than the pre-February 24 price at which the gas was flowing to Europe through the Russian pipelines.

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Korolev went on to say that energy is the lifeblood of the economy and higher energy prices means that Europe, which already has comparatively high labor costs, will be even less competitive versus the emerging markets.

"This spells trouble for the famous European trade surplus," he said. "It is quite likely that political turmoil due to European electorates being very dissatisfied with high energy bills and high unemployment will filter through to change of heart in most, if not all of western European administrations. This may take a couple of years, enough for the politicians to save face, but our base case is it has to happen eventually."

Since 2021, energy and food prices in Europe have been surging as part of a global trend in large part due to the COVID-19 restrictive measures. After the beginning of Moscow's special military operation in Ukraine on February 24 and the imposition of comprehensive sanctions against Russia by the collective West, fuel and food prices have increased, pushing many European governments to resort to contingency measures.