Europe
The European Central Bank has achieved a soft landing. Inflation is back to target, with well-anchored inflation expectations. The unemployment rate is historically low, and real economic growth is stable, albeit weak. Given that little to no additional easing will come from the ECB, investors should underweight government bonds relative to equities.
The outlook for European equities is becoming more appealing relative to US equities. Many structural headwinds are fading in Europe, and valuations remain historically cheap. Investors should position accordingly to benefit from the region’s cyclical rerating.
European euphoria is overdone. The most exceptional asset class in Europe is Infrastructure, but granular opportunities span other asset classes by sector and country. Venture Capital is a North America and Asia-Pacific play. We downgrade Private Credit, and upgrade Global Buyouts. Time to take profits on Long-Short Equity Hedge Funds.
This insight gives life to four high-conviction views on European small caps, aero¬space & defense, banks, and telecoms by harnessing the power of BCA’s Equity Analyzer (EA).
Euro area and Chinese interest rates must fall much further to prevent monetary policy from becoming ultra-restrictive. But Trump’s attempts to force unwarranted rate cuts from the Fed risks a vicious backlash from the bond vigilantes.
