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The Case for Europe
1 Jun 2023
1 minute read
1 minute read
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.
For the past decade, a long-lasting deflationary economic cycle drove bond yields lower creating the perfect environment for high-growth stocks to flourish. 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?
