The rediscovery of European equities
By Olgerd Eichler
Go to Newsroom
Like a phoenix rising from the ashes, the European stock market made a brilliant comeback in the last quarter of 2022. The outlook remains promising, as Europe has also got off to a good start this year and has been able to make up ground on the American market.
The valuation of the stock markets also speaks in favour of the European continent, because of their poorer long-term performance compared to the USA, many European companies seem to be downright bargains at the moment. Measured by the price-earnings ratio (P/E), for example, the discount is still just under 30%. For many investors who are still on the sidelines, this could be reason enough to look more closely at European shares again and take advantage of the price opportunities that present themselves.
Tailwind thanks to lower interest rates and a weak euro
Moreover, interest rates in Europe are still at lower levels, so equities are probably the better choice from a yield perspective compared to other asset classes. By contrast, the ratio appears less attractive in the US, where the sharp rise in interest rates now offers bond investors a real alternative to higher-valued US equities.
The weak euro also benefits local companies because export-oriented companies are more competitive in an international comparison. This makes it easier to pass on price increases to foreign customers and better compensate for inflation-related cost increases.
In 2022, Energy costs were one of the biggest concerns; the dependency on Russia brought Germany in particular to the brink of an energy crisis. But Europe has shown the necessary determination and successively reduced its dependence on Russian gas; well-filled energy storage facilities and the mild winter have helped to ease the situation. As gas prices have recently fallen significantly, the cost burden for companies and consumers in 2023 should not be as bad as feared in autumn.
Upside potential thanks to stable business models and attractive valuations
The past year demonstrated that during a difficult environment, Europe has once again proven that it is proactive in addressing its crises and does not stand by and watch. This is reflected in the decisive action of governments - be it regarding the sanctions against Russia, the joint support for Ukraine or the programmes launched to stabilise the situation of consumers and businesses.
With perceptions of European equities still weak by international standards and pessimism still prevailing among many market participants, Europe's outperformance could continue. Even if not all European companies are well positioned, there is a promising market environment - especially for stock pickers. This is because Europe has many companies with excellent business models, which are well managed and show promising growth opportunities. The low valuations of the markets offer good opportunities to buy these companies at attractive prices. This creates interesting price opportunities from which investors can profit through the right equity exposures in Europe.
This is a marketing communication.
This marketing communication is for information purposes only and provides the addressee with guidance on our products, concepts and ideas. This does not form the basis for any purchase, sale, hedging, transfer or mortgaging of assets. None of the information contained herein constitutes an offer to buy or sell any financial instrument nor is it based on a consideration of the personal circumstances of the addressee. It is also not the result of an objective or independent analysis. MainFirst makes no express or implied warranty or representation as to the accuracy, completeness, suitability, or marketability of any information provided to the addressee in webinars, podcasts or newsletters. The addressee acknowledges that our products and concepts may be intended for different categories of investors. The criteria are based exclusively on the currently valid sales prospectus. This marketing communication is not intended for a specific group of addressees. Each addressee must therefore inform themselves individually and under their own responsibility about the relevant provisions of the currently valid sales documents, on the basis of which the purchase of shares is exclusively based. Neither the content provided nor our marketing communications constitute binding promises or guarantees of future results. No advisory relationship is established either by reading or listening to the content. All contents are for information purposes only and cannot replace professional and individual investment advice. The addressee has requested the newsletter, has registered for a webinar or podcast, or uses other digital marketing media on their own initiative and at their own risk. The addressee and participant accept that digital marketing formats are technically produced and made available to the participant by an external information provider that has no relationship with MainFirst. Access to and participation in digital marketing formats takes place via internet-based infrastructures. MainFirst accepts no liability for any interruptions, cancellations, disruptions, suspensions, non-fulfilment, or delays related to the provision of the digital marketing formats. The participant acknowledges and accepts that when participating in digital marketing formats, personal data can be viewed, recorded, and transmitted by the information provider. MainFirst is not liable for any breaches of data protection obligations by the information provider. Digital marketing formats may only be accessed and visited in countries in which their distribution and access is permitted by law.
For detailed information on the opportunities and risks associated with our products, please refer to the current sales prospectus. The statutory sales documents (sales prospectus, key information documents (PRIIPs-KIDs), semi-annual and annual reports), which provide detailed information on the purchase of units and the associated risks, form the sole authoritative and binding basis for the purchase of units. The aforementioned sales documents in German (as well as in unofficial translations in other languages) can be found at www.mainfirst.com and are available free of charge from the investment company MainFirst Affiliated Fund Managers S.A. and the custodian bank, as well as from the respective national paying or information agents and from the representative in Switzerland. These are:
Austria, Belgium, Germany, Liechtenstein, Luxembourg: DZ PRIVATBANK S.A., 4, rue Thomas Edison, L-1445 Strassen, Luxembourg; France: Société Générale Securities Services, Société anonyme, 29 boulevard Haussmann, 75009 Paris; Italy: Allfunds Bank Milan, Via Bocchetto, 6, 20123 Milano; SGSS S.p.A., Via Benigno Crespi 19A-MAC2, 20159 Milano; Portugal: BEST - Banco Eletronico de Servico Toal S.A., Praca Marques de Pombal, 3A,3, Lisbon; Spain: Société Générale Securities Services Sucursal en Espana, Plaza Pablo Ruiz Picasso, 1, 28020 Madrid; Switzerland: Representative: IPConcept (Schweiz) AG, Münsterhof 12, CH-8022 Zürich; Paying Agent: DZ PRIVATBANK (Schweiz) AG, Münsterhof 12, CH-8022 Zürich.
The investment company may terminate existing distribution agreements with third parties or withdraw distribution licences for strategic or statutory reasons, subject to compliance with any deadlines. Investors can obtain information about their rights from the website www.mainfirst.com and from the sales prospectus. The information is available in both German and English, as well as in other languages in individual cases. Explicit reference is made to the detailed risk descriptions in the sales prospectus.
This publication is subject to copyright, trademark and intellectual property rights. Any reproduction, distribution, provision for downloading or online accessibility, inclusion in other websites, or publication in whole or in part, in modified or unmodified form, is only permitted with the prior written consent of MainFirst.
Copyright © 2023 MainFirst Group (consisting of companies belonging to MainFirst Holding AG, herin „MainFirst“). All rights reserved.