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Market Update

Buy Europe?

Investors need to ask themselves if attractive valuations in the region trump the negative news.

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After several years of recessions, default threats, austerity measures, and more, Europe remains as fragile as ever. In 2016 alone, we've seen the U.K. vote to leave the European Union, a prolonged Spanish election that saw a rise in anti-austerity sentiment, and an Italian prime minister who said he'd resign if a December referendum on constitutional reform doesn't go his way. Throw in continued sovereign debt issues, banking sector worries, and negative interest rates, and you can't help but wonder why anyone would want to invest in the region.

Many investors are staying away from Europe. According to Alina Lamy, a senior market research analyst with Morningstar, international funds, of which Europe accounts for a substantial portion of assets, have seen just $2.6 billion in net inflows between January and the end of September, compared with $191 billion in inflows over the same time period in 2015. Since April, though, these funds have experienced $17 billion in net outflows.

Bryan Borzykowski does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.