Does investing in European equities still make sense? Gabriela Santos, Global Market Strategist at JP Morgan, lays out three key reasons to not ignore the opportunity in European equities.
While recession fears in Europe are elevated, investing in Europe is not a bet on the European economy
“Over 50% of Europe's revenue comes from outside its borders. For example, LVMH (French-listed, global luxury brand) sources revenue from all other the world, with over 40% coming from EM, where there is growing demand from the rise of the middle class.”
Most consider Europe as a cyclical play, but it also represents structural growth opportunities
“European markets experienced a significant change in sector composition since the Global Financial Crisis. Looking at the Euro Stoxx 50, financials dominated the index at ~35% of market capitalization in 2008, dropping to under 15% today. Meanwhile, technology has risen from 6% to over 20% of the index. This share is expected to grow further with 20% of the EUR750 billion European recovery fund allocated to digitalize economies.”
Investing in Europe offers exposure to opportunities not available in the US
“Europe dominates the luxury goods space and is at the forefront of the energy transition. 75% of offshore wind capacity is installed in Europe. The EU is focused on phasing out its dependence on Russian oil and pushing forward with the "REPowerEU Plan.” This plan will cut EU dependency of Russian oil by two-thirds by the end of 2022 and entirely by 2030.”
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