Europe is once again offering exciting opportunities in equities, global investment manager AllianceBernstein (AB) said today.
The fundamental picture has improved and evidence is growing that conditions for active stock pickers are better than they have been for years.
“Many investors are understandably paying attention to the US economic recovery as an important opportunity, but we think they should also remain alert to the potential for capturing attractive risk-adjusted returns elsewhere,” said Sharon Fay, Head and Chief Investment Officer— Equities.
“Europe is a region which, in our view, investors should be carefully considering right now.”
While concerns linger over the management of Greece’s credit crisis, the risk of contagion to other peripheral euro-area countries remains manageable, in AB’s view. Fears of a breakdown of the single currency have abated and signs of broad economic recovery have materialized.
“A number of questions remain to be resolved, such as whether the economy will gain momentum, whether disinflation will threaten growth, and whether the European Central Bank is capable of creating policies to foster a sustainable, long-term recovery,” said Fay.
“But even as these questions remain unanswered for now, we think this is a good time for investors to consider capturing the potential of the region’s equity markets, as recovery continues to unfold.”
Fay noted that the political and economic turmoil of recent years had obscured the fact that Europe remains home to many globally successful companies which offer a gateway to opportunities in both developed and emerging markets.
Two recent trends, however, suggest that the time is right to reassess them.
“In early 2014, European companies traded at significant discounts to their peers in other global markets because of lingering concern about issues in the euro area,” said Fay.
“Yet, as anxiety has eased, stock correlations have declined sharply from peaks in 2011 as investors have refocused on fundamentals. These trends have created excellent conditions for actively managed portfolios to capture the significant return potential we believe is available in Europe.”