Why the time to own these stocks is now

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Why the time to own these stocks is now

2017: Europe's year of falling uncertainty

Early last year, I dubbed 2016 the Year of Falling Uncertainty - the year false fears vanished one by one, gradually clearing the fog that shrouded markets. And so it went!

As fears expired, world stocks rose 28.2% - or 7.5% when measured in dollars, removing the weak pound's skew. Next year, more uncertainty should fall, this time in Europe. Buy now!

Entering 2016, sentiment was gloomy worldwide. I often quote Sir John Templeton, who perfectly painted sentiment's evolution during bull markets: They're "born on pessimism, grow on skepticism, mature on optimism and die on euphoria".

Warming sentiment is usually necessary for big late-bull market returns. Americans' persistent skepticism began melting in 2016 as investors got over China fears, junk bond jitters, falling oil, Brexit, Donald Trump and Fed rate hike worries. After grinding like a car with stripped gears for three years, sentiment turned up. US stocks rose 32.7% last year (12.0% in USD), besting the world.

America and Britain are entering optimism, but Europe is behind - the debt crisis and recession double-dip extended gloom. Political fears compound it. All last year, Italian banks, rising populism, slow growth, negative yields and Trump-phobia deepened investors' joylessness. No clarity there - just thick uncertainty fog. Even the Greek standoff is back!

Opportunity knocking

That thick fog is opportunity knocking. As it burns off, stocks should shine. 2017 should be Europe's Year of Falling Uncertainty. Investors will finally get the political clarity that buoyed US and UK stocks last year.

It will evolve gradually, echoing America in 2016. Just look at the calendar. Unless Parliament throws a spanner in the works, Brexit negotiations should kick off in March. The Dutch vote on 15 March, clarifying populist Geert Wilders' standing. He leads polls now, but even if his Freedom Party wins the most votes, he'd have to build a coalition. Gridlock likely blocks anything radical.

France votes on 23 April, with a likely runoff on 7 May - then you'll know if Marine Le Pen wins. There is extra uncertainty ahead of the contest, thanks to a scandal surrounding center-right candidate François Fillon, but that just gives stocks more "wall of worry" to climb.

The time to own stocks is now

If Matteo Renzi gets his way, Italy votes mid-year, ending uncertainty over the Five Star Movement's national clout. Greece might also hold snap elections, but they already elected populists, and the world didn't end. Finally, Germany rounds out the pack in September, clarifying Angela Merkel's future.

As these dominoes fall, political angst should give way to greater comfort, no matter the outcomes. Just knowing brings relief. It's cathartic! Look again at America and Britain, post-Trump and Brexit. Investors quickly got over it and on with it.

By year-end, what John Maynard Keynes called "animal spirits" - "a spontaneous urge to action rather than inaction" - began to awaken. Confidence that drives "decisions to do something positive," like bid up stocks as a bull market matures. Animal spirits are stirring in America and Britain now and should do so in Europe late this year or early next.

The time to own stocks is now. Sentiment shifts are gradual, as more investors shrug off skepticism, slowly fathoming the growing world around them. Eurozone economic data are consistently beating expectations, with more positive surprise than even America. Buy before everyone else gets wise and stirring animal spirits have the bulls dancing.

Two new stock picks

German enterprise software giant SAP (SAP) moves in fits and starts. Expect a 2017 start as its cloud computing business seems finally in clear skies. It's among the cheaper big growth Tech firms at 21 times my earnings estimate. No clouds in its 2017 future.

While this should be Europe's year to shine, don't ignore America. Amgen (AMGN) is a Tech firm mis-cast as a druggie. Health Care lagged in 2016 but shouldn't now. Amgen can lead as arguably the world's largest Biotech firm. At only 10 times my 2017 earnings estimate with a 2.7% dividend yield, it's cheap enough for nicely higher valuations on top of 20% earnings growth.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.