In focus
[ SECTOR PROFILE ]
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The factors that have contributed to Europe’s
underperformance over the past few years could
soon begin to work in its favour, writes Adam Lewis
Every cloud…
L
ast year was a bad one
for European equities.
While all major developed
stock markets struggled
performance wise, the 11.07 per cent
loss from the Euro STOXX Index
meant it finished bottom of the pile.
Active managers fared even worse,
with the IA Europe ex UK sector
down 12.16 per cent, and IA European
Smaller Companies fared worse still,
with losses of 15.46 per cent capping
a fairly miserable year for investors in
the continent.
Worth the hassle?
Beset with sluggish economic growth
and continued political uncertainty,
this has raised the question of whether
investing in Europe is worth the hassle
– and is it an area of the market where
active managers can add value?
Despite the fact the global economic
FE TRUSTNET
picture for 2019
looks set to
become more
challenging,
Rory Bateman,
head of UK
and European
equities at
Schroders,
maintains Europe should
enjoy above-trend growth in
the year ahead. This, he argues, is
Beset with sluggish
economic growth and
continued political
uncertainty, this has raised
the question of whether
investing in Europe is
worth the hassle
because of how
far Europe’s economic recovery
lags behind the rest of the world,
as well as its continuing domestic
consumer expansion.
“Investors can access European
equities at a five-year valuation
low following the market decline
experienced during 2018,” he adds.
“We often discuss the valuation
differential between the US and
Europe and at this particular
moment the European price-to-
earnings discount appears extreme.”
“While European companies have
not benefited from the share-buyback
bonanza experienced in the US, the
dividend yield on European equities
is 3.7 per cent and overall corporate
balance sheets are in rude health.”
For Ben Yearsley, director at Shore
Financial Planning, investors should
never write off any region and he
believes Europe is an interesting area
at present. However, while he concedes
markets are cheap, he adds that there
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