Equity, solid prospects for the Eurozone; potential come-back of non-Euro investors

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Patrick Moonen and Valentijn van Nieuwenhuijzen (NN Investment Partners) see this as a modest positive for markets in the near-term, but also acknowledge that most of the “good news” on Macron was already priced in recent weeks.

However, especially European growth assets like equities stand well positioned to benefit from this news as it takes away the largest risk factor that was visible to markets at this points and allows investors to re-focus on the strength of underlying fundamentals.

Political risk was one of the main concerns for investors this year given the heavy election agenda and the populist outcomes in the UK and the US. This risk has kept the Eurozone equity risk premium at high levels (2% above the US risk premium). Now we think this risk premium will come down which will lead to an outperformance of Eurozone equities relative to the rest of the world. Of course, the election outcome was not totally unexpected. This has limited the short term bounce and it also led to some profit taking (buy the rumour, sell the fact) but medium term the prospects are strong.

With the European economy in its strongest recovery since 2010 and European earnings expected to rise at a solid double digit pace in 2017 the future for European equities looks bright. The current earnings season is one of the strongest in a decade, macro data point to a sustainable recovery and from a behavioural side, we do not observe excessive investor optimism. In addition, we may witness a renewed interest in Eurozone equities from non-Euro investors. In short, the Eurozone is our preferred region within equities.


Patrick Moonen – Principal Strategist Multi-Asset – NN Investment Partners
Valentijn van Nieuwenhuijzen – Head of Strategy and Multi-Asset – NN Investment Partners