It doesn’t take long when travelling in Ireland to appreciate the virtues of contrarian analysis. That’s because it’s hard to find traces of the economy that was nearly given up for dead during the 2008 Global Financial Crisis . Fifteen years later there are lines outside most stores, and not just in areas frequented by tourists. Restaurants require reservations and pubs are packed.
Ireland’s stunning growth in recent years came in the wake of many bad years leading up to and including the GFC. But that’s precisely the point that contrarians make: Bad times don’t last forever, just as trees don’t grow to the sky. Factors in the Irish market’s favor Two other reversion-to-the-mean factors will work in the Irish stock market’s favor in coming years, both in its own right and relative to the U.S. market. One is the Ireland market’s P/E ratio, which has remained stubbornly low since the GFC, in contrast to the S&P 500 SPX. This is one reason why the S&P 500 has outperformed the Irish stock market since 2009, despite the U.S. having a much slower economic growth rate.
Another reversion-to-the-mean factor in Ireland’s favor in coming years, at least to a U.S.-dollar-based investor, is a weaker dollar DX00, -0.06%. The opposite has been true over the past 15 years, as the euro EURUSD, +0.05% has lost 20% of its value against the dollar, creating significant headwinds for a U.S. investor in Irish equities.