Disclosure – Non-substantive Research
This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. With this commentary, Kepler Partners LLP does not intend to influence your investment firm's behaviour.
Despite Europe’s popularity among holidaymakers, it appears that investors prefer sunnier shores. According to The Investment Association, UK investors were net sellers of European equities in 2018, 2019 and 2020. Historically low returns from European equity markets (compared to other regions) and low GDP growth seem to have soured investors’ moods. In this article we will examine the AIC Europe and AIC European Smaller Companies sectors over the last 12 months, to see whether this pessimism is justified today. We’ve chosen to review the last 12 months as they neatly capture the start of the global value rally, kicked off by the successful development of the COVID-19 vaccine. This period also saw a revision of the growth momentum which carried global equity markets, with cyclical and value stocks since seeing a recovery. As we demonstrate in this article, it was not as clear cut for Europe, as its increased economic activity was shared more equally across companies and trusts.
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