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VOLATILITY DEFUSED

Mark Hinton analyses the outlook for European equities in 2017 and suggests which of the best-performing, biggest and newest funds are worthy of our attention

Fund selector European equities

After the unpredictable events of 2016 with political headlines and top-down macro issues driving significant sector rotation, 2017 should be a year when fundamentals play a more important role. A market backdrop with falling stock correlations should suit active managers.

Mark Hinton

Head of equity strategies, Allfunds Bank

Renewed volatility

Last year was the worst for European equity outflows since the 2008 crisis, as investors turned away from Europe towards emerging markets and US equities.

This was perhaps unsurprising as the first few months of 2016 were dominated by global growth concerns, the European banking system, European deflation, lack of European corporate earnings and worries about the stability of the EU due to Brexit.

The shock Brexit vote in June hit risky assets hard, but European equity markets bounced back strongly in Q3. This rebound was led by growing evidence over the summer that Brexit had not led to a significant short-term economic slowdown in the UK or continental Europe. However, a catalyst was needed for the ensuing value rally and energy and financials were at the forefront.

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