Markets
Visualizing the Decline of Freedom Over 12 Consecutive Years
Visualizing the Decline of Freedom Over 12 Consecutive Years
The Chart of the Week is a weekly Visual Capitalist feature on Fridays.
Like many other things in this world, the amount of freedom that people have ebbs and flows with time.
In general, it can be argued that political and economic freedoms have been increasing steadily since The Enlightenment – but of course, there are always shorter corrections along the way where freedom seems to spiral downwards in the interim.
Right now, we’re in one of those ruts, and global freedom has consecutively declined for a 12 year period.
Democracy in Crisis
Freedom in the World, a report published every year since 1973, attempts to measure civil liberties and political rights around the world. It’s put together by Freedom House, a non-governmental organization based in the United States.
According to their index, here is the share of “free” countries globally between 1973-2018:
This year’s report for 2018 is entitled “Democracy in Crisis”, and it sounds the alarm on eroding freedom throughout the world.
Falling Scores
While the number of “free” countries is holding fairly steady at close to 45%, there is a clear downtrend with the scores of the countries themselves.
In 2017, for example, there were 71 countries that had net declines in score, while only 35 had net increases. This makes for a differential of -36, which is the widest gap during the 12 year downtrend.
Year | Improved | Declined | Differential |
---|---|---|---|
2006 | 56 | 59 | -3 |
2007 | 43 | 59 | -16 |
2008 | 38 | 60 | -22 |
2009 | 34 | 67 | -33 |
2010 | 34 | 49 | -15 |
2011 | 37 | 54 | -17 |
2012 | 43 | 63 | -20 |
2013 | 40 | 54 | -14 |
2014 | 33 | 62 | -29 |
2015 | 43 | 72 | -29 |
2016 | 36 | 67 | -31 |
2017 | 35 | 71 | -36 |
Why do scores continue to decline?
Here are some of the specific examples, cited by the report:
- The erosion of democratic norms in the U.S., which is actually the extension of a seven year trend
- The expansion of influence from key autocracies, particularly Russia and China
- Turkey’s transition from “Partly Free” to “Not Free” – the result of President Erdoğan asserting more control over the country
- Big drops in the scores of European countries like Poland and Hungary, where populist leaders are consolidating power
- Another drop in Venezuela’s score, as the country undergoes a full-blown humanitarian crisis
- A recent backslide in the scores in Arab Spring countries – even in Tunisia, which was heralded as a democratic success story
For much more in-depth reading, here is a link to the full report PDF.
Markets
The European Stock Market: Attractive Valuations Offer Opportunities
On average, the European stock market has valuations that are nearly 50% lower than U.S. valuations. But how can you access the market?
European Stock Market: Attractive Valuations Offer Opportunities
Europe is known for some established brands, from L’Oréal to Louis Vuitton. However, the European stock market offers additional opportunities that may be lesser known.
The above infographic, sponsored by STOXX, outlines why investors may want to consider European stocks.
Attractive Valuations
Compared to most North American and Asian markets, European stocks offer lower or comparable valuations.
Index | Price-to-Earnings Ratio | Price-to-Book Ratio |
---|---|---|
EURO STOXX 50 | 14.9 | 2.2 |
STOXX Europe 600 | 14.4 | 2 |
U.S. | 25.9 | 4.7 |
Canada | 16.1 | 1.8 |
Japan | 15.4 | 1.6 |
Asia Pacific ex. China | 17.1 | 1.8 |
Data as of February 29, 2024. See graphic for full index names. Ratios based on trailing 12 month financials. The price to earnings ratio excludes companies with negative earnings.
On average, European valuations are nearly 50% lower than U.S. valuations, potentially offering an affordable entry point for investors.
Research also shows that lower price ratios have historically led to higher long-term returns.
Market Movements Not Closely Connected
Over the last decade, the European stock market had low-to-moderate correlation with North American and Asian equities.
The below chart shows correlations from February 2014 to February 2024. A value closer to zero indicates low correlation, while a value of one would indicate that two regions are moving in perfect unison.
EURO STOXX 50 | STOXX EUROPE 600 | U.S. | Canada | Japan | Asia Pacific ex. China |
|
---|---|---|---|---|---|---|
EURO STOXX 50 | 1.00 | 0.97 | 0.55 | 0.67 | 0.24 | 0.43 |
STOXX EUROPE 600 | 1.00 | 0.56 | 0.71 | 0.28 | 0.48 | |
U.S. | 1.00 | 0.73 | 0.12 | 0.25 | ||
Canada | 1.00 | 0.22 | 0.40 | |||
Japan | 1.00 | 0.88 | ||||
Asia Pacific ex. China | 1.00 |
Data is based on daily USD returns.
European equities had relatively independent market movements from North American and Asian markets. One contributing factor could be the differing sector weights in each market. For instance, technology makes up a quarter of the U.S. market, but health care and industrials dominate the broader European market.
Ultimately, European equities can enhance portfolio diversification and have the potential to mitigate risk for investors.
Tracking the Market
For investors interested in European equities, STOXX offers a variety of flagship indices:
Index | Description | Market Cap |
---|---|---|
STOXX Europe 600 | Pan-regional, broad market | €10.5T |
STOXX Developed Europe | Pan-regional, broad-market | €9.9T |
STOXX Europe 600 ESG-X | Pan-regional, broad market, sustainability focus | €9.7T |
STOXX Europe 50 | Pan-regional, blue-chip | €5.1T |
EURO STOXX 50 | Eurozone, blue-chip | €3.5T |
Data is as of February 29, 2024. Market cap is free float, which represents the shares that are readily available for public trading on stock exchanges.
The EURO STOXX 50 tracks the Eurozone’s biggest and most traded companies. It also underlies one of the world’s largest ranges of ETFs and mutual funds. As of November 2023, there were €27.3 billion in ETFs and €23.5B in mutual fund assets under management tracking the index.
“For the past 25 years, the EURO STOXX 50 has served as an accurate, reliable and tradable representation of the Eurozone equity market.”
— Axel Lomholt, General Manager at STOXX
Partnering with STOXX to Track the European Stock Market
Are you interested in European equities? STOXX can be a valuable partner:
- Comprehensive, liquid and investable ecosystem
- European heritage, global reach
- Highly sophisticated customization capabilities
- Open architecture approach to using data
- Close partnerships with clients
- Part of ISS STOXX and Deutsche Börse Group
With a full suite of indices, STOXX can help you benchmark against the European stock market.
Learn how STOXX’s European indices offer liquid and effective market access.
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