Schroders: European Equities in 2017

Rory Bateman, head of UK & European equities at Schroders, believes that 2017 could be a volatile year for European Equities but this can create significant investment opportunities, particularly as earnings look poised to improve.

Schroders: European Equities in 2017

Much has been made of the deluge of elections due in Europe in 2017 and the uncertain investment environment that could result. We take the view that market uncertainty and volatility frequently present opportunities to buy good companies at attractive valuations.

As active, long-term investors, the periods in which we can obtain the best returns are often those when others are most fearful.

Alongside the various forthcoming European elections, the UK’s Brexit negotiations will be closely watched. We see Brexit primarily as an issue for the UK and do not believe it will have a significantly detrimental impact on corporate continental Europe. As an example, only 5% of EU exports go to the UK.

Europe’s economic recovery remains slow but steady and we do not expect Brexit to derail this.

Attractive valuations in Europe

As ever with equities, the price you pay is a key determinant of the returns you can potentially make. In our view, European equities continue to look attractive from a valuation standpoint. The cyclically-adjusted price-to-earnings ratio currently stands at around 14x versus its 30-year average of 20x. We therefore feel Europe looks attractive relative to its own history as well as relative to other regional stock markets.

 

Please remember, no news or research item is a recommendation or advice to buy. Every Investor is not responsible for accuracy and may not share the author’s views. If you are unsure of the suitability of any investment for your circumstances please contact an adviser. All investments can fall as well as rise in value so you could get back less than you invest. 

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