European shares will be the best performers next year, according to the latest Reuters poll of more than 350 strategists, analysts and fund managers. Frankfurt’s DAX is already up nearly 20 percent this year and is forecast to rally another 10 percent in 2014.
But the experts in foreign exchange that Reuters surveys each month are also saying that the euro, just above $1.37, and not far off a two-year high against the dollar, will fall.
While both predicted outcomes may turn out to be true, the problem is that the flow of foreign money into European stocks is one of the reasons why the euro has remained so strong.
And the currency's relentless strength is what makes investing in Europe a risky long-term bet.
Until the exchange rate falls, many countries in the euro zone have little hope of boosting their exports, and more broadly, becoming more economically competitive.