The Case for Europe
For the past decade, a long-lasting deflationary economic cycle drove bond yields lower creating the perfect environment for high-growth stocks to flourish.
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Key takeaways:
- Europe is home to many financial, energy, material and industrial companies, which tend to do better than their defensive counterparts when emerging from a downturn.
- To achieve net zero carbon, energy companies – which have in place the infrastructure, technology and cash flow – will be essential. Many of the market leaders in energy reside in Europe meaning that it is well placed to benefit from this long-term secular growth theme.
- Valuations are cheap, even by European standards, and yet a diverse set of robust companies exist in the continent. This could offer an attractive entry point for investors.
This backdrop saw growth stocks outperform value stocks, with the US leading the growth charge while value-oriented Europe lagged behind. We believe that today’s environment of higher inflation and higher rates provides ground for value stocks to outperform growth, marking a turning point for European equities. So, how will this cycle be different for Europe?
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These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.
Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.
The information in this article does not qualify as an investment recommendation.
There is no guarantee that past trends will continue, or forecasts will be realised.
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