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European Equity Conviction

Last week we increased our European Equity exposure to a 4 percentage point overweight position relative to our core allocations. We had felt that there had been a reasonable correction over the prior two months, with the Euro Stoxx 50 index falling by around 10% from its April highs.

Furthermore, we remain optimistic that an economic recovery is underway in Europe but that it is still in its early stages. Unlike in the US, where unemployment started to fall more than five years ago, in the Eurozone the employment situation only began to improve in mid-2013. Thus while the unemployment rate has fallen, it is still high at 11.2%, meaning that monetary policy will remain likely very loose for at least the next couple of years.

We feel that this, combined with profit margins that provide scope for improvement and dividend yields that are reasonable, bodes well for European Equities.

Important information

Past performance is not a guide to future returns. The views expressed are those of Peter Elston at the time of writing and are subject to change without notice. They are not necessarily the views of Seneca Investment Managers and do not constitute investment advice. Whilst Seneca Investment Managers has used all reasonable efforts to ensure the accuracy of the information contained in this communication, we cannot guarantee the reliability, completeness or accuracy of the content.

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