Investing in Europe has become more attractive

Spotlight offers insights into the Berenberg product universe and highlights key topics related to current market developments.

Investing in Europe is not fashionable these days. Pessimism around the Old Continent’s prospects are commonplace. Stalling growth, high energy prices, an unattractive cost structure and a dearth of innovation are most frequently cited when arguing the case against investing in Europe. While the US is seemingly inventing the future, Europe is thought to be living off its past.

It is true that such a view would at least superficially be supported by the performance track record of the European equity market. Indeed, when looking at the past fifteen years, the headline return numbers are not particularly awe enticing. In fact, most global markets and certainly the most considered global benchmarks outperformed the European market significantly. While this is important, it is only part of the story. Also true is that significant subsets of the European market performed excellently over the last two decades and delivered returns that stack up much more favourably in a global comparison. What’s more, these subsets, driven by their structural growth, are gaining ground, and are becoming more important for the overall market. Therefore, we believe that contrary to the public perception the European equity market is becoming more attractive, not less.

In a new report series, we seek to address this disconnect. We will look at European equity performance over the past couple of decades, explain what has driven the subdued result and highlight which subsets of the market have worked well. Finally, we will argue that although European indices cannot match other markets’ growth credentials, a selective approach to investing in Europe would have delivered highly attractive results. We thus make the case for focusing on Europe’s strengths. We firmly believe, and seek to demonstrate, that across multiple global industries, Europe occupies positions of enormous comparative advantage. These are industries with significant structural growth tailwinds at their back and thus a promising future ahead.

Read the full publication here


Matthias Born
Head of Investments and CIO Equities
Justus Schirmacher
Portfolio Manager