Investing in Europe: what the experts think
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Macron wins big
European markets jumped nearly 1% on Monday after French President Emanuel Macron’s fledging La République En Marche! party secured an “overwhelming majority” in last weekend’s parliamentary elections, said Gavin Lumsden on Citywire. Investors are hoping he’ll use his “astonishing rise to power” to reform France’s restrictive labours laws and its expensive pension system – as well as reviving “faith in the European Union”. That’s a tall order, even if you buy into what Elliot Hentov, of State Street Global Advisors, calls France’s “wholesale political revolution”. But if Macron pulls it off, the benefits for European investors should be “twofold”, says Hentov: as well as increasing domestic investment and productivity, Macron is also “setting the stage for more audacious reforms of the eurozone”.
Animal spirits
“In truth, business sentiment in France and elsewhere was ticking up before Macron’s success,” said The Economist. “Animal spirits” in Europe’s boardrooms have been stirred by an improving EU economy, low oil prices, a cheap euro and supportive monetary policy: the 19 eurozone economies grew in aggregate by an annualised rate of 2.3% in the first quarter – “nearly double America’s rate”. Optimism among manufacturers in Spain and Portugal is at its highest for years. The think tank Ifo talks of a “euphoric” mood in Germany, with the Business Climate Index reaching a peak not seen since 1991. “Adding to this sense of dynamism is a welter of M&A deals, even as activity has dried up across the Atlantic.” According to Bloomberg, deal activity among European firms rose by 34% in the first quarter.
Fund picks
This European rally looks like it has legs, said Money Observer. How best to ride it? Actively managed funds and trusts “can add real value for investors seeking exposure” to such a “diverse region”. Among the top-performing funds focusing on smaller firms are TR European Growth and Marlborough European Multi-cap, which are up by 98.9% and 88.5% respectively over three years. For larger companies, check out Henderson European Focus, which has delivered 53.1% over three years.