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Digital Subscriptions > > FAREWELL TO EUROPE?


European equities have been a popular choice for investors so far in 2017 but, despite a dose of ‘Macron mania’, growth looks like it has peaked

Contrarian European equities

Are current valuations really justified in Europe? In a word, no. At Rathbones, we have maintained an underweight allocation to European equities. The economy continues to strengthen but the rate of change is probably as a good as it is going to get for a while.

Despite a significant dose of ‘Macron mania’, growth looks like it is topping out. For now, economic data is still surprising on the upside, but these are decreasing in magnitude and frequency.

For example, Belgium’s business confidence – our favoured gauge among eurozone- focused companies – is healthy but has been range-bound since the beginning of the year. Meanwhile, equity valuations are not cheap compared against their historical average or ratio with other regional equity markets. Indeed, we believe return on equity will struggle to improve without the financial sector.

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