Prospects for a reflationary economic policy under US President Trump, and clear signs of improvement in many forward-looking eurozone economic indicators in January have signficantly prightend the outlook for the region in recent weeks.
This strong economic backdrop and a more supportive global situation could create opportunities for investors as “Europe appears to be the one best placed to take advantage of a cyclical upswing”, according to McQuaker, manager of the Fidelity Multi Asset Open Range.
The positive growth outlook could even stunt the rise of populism across the continent he says, and dash the chances of candidates such as the far-right’s Marine Le Pen in the run up to the French elections.
“Much of the current pessimism around Europe comes from political risks, with elections either due or likely in every major country except Spain. Stronger growth, however, could tilt the balance away from populists and towards the status quo,” he said.
“A victory for Marine le Pen may be the biggest risk, but the binary choice in the final round of the French elections is likely to work against her. Indeed, a centrist win in France could be a good catalyst for European equity outperformance.”
He admitted European equities have “posed a conundrum” in recent years but growth and inflation could see earnings pick up and help boost the economy.
He added: “Even some of the most bearish investors are now revising up their expectations for earnings growth, as well as their year-end targets for the Euro Stoxx 600.”
McQuaker picked out three funds for investors to consider if looking to increase European exposure. Firstly, Invesco Perpetual European Equity Income, followed by Jupiter European Special Situations and then the Threadneedle European Select funds as potential areas to see returns.
