European equity outperformance is unlikely to last without fundamental changes, according to the BlackRock Investment Institute.<\/p>\n
Strategists at the world\u2019s largest asset manager have refrained from upgrading European equities to overweight despite a strong bout of performance year-to-date.<\/p>\n
\u201cEuropean equities had a flash of outperformance over the US this year and we see bright spots, but the region needs structural reforms to outshine the US,\u201d the BlackRock Investment Institute said in a recent note.\u00a0<\/p>\n
\u201cWhat\u2019s needed to ignite an investment renaissance? We think more business-friendly policies and deeper capital markets are required for a broad overweight to European stocks,\u201d the note added.<\/p>\n
European stocks have lagged US stocks for the better part of the last two decades, with the MSCI Europe index up 241.3% versus 679.4% from the S&P 500 over the past 20 years.<\/p>\n
However, the MSCI Europe index is up 27.24% year-to-date in US dollar terms, versus a 15.3% return from the S&P 500 index over the same period.<\/p>\n
As such, the asset class has started to garner attention from global investors after years of underperformance.<\/p>\n
BlackRock\u2019s strategists noted that Europe\u2019s long underperformance has led to lagging European stock valuations where every sector trades at a discount to its US equivalent.<\/p>\n
They said: \u201cWhat would it take for Europe to take a sustained lead? Reforms addressing long-held challenges, creating a more business-friendly environment and deepening its capital markets, in our view.\u201d<\/p>\n
According to the strategists, Europe needs to deepen its capital markets to help lower the cost of capital and make Europe a more attractive destination to invest.<\/p>\n
They added that it needs to channel more household savings into productive savings, where European households hold a third of their financial assets in cash, twice that of the US.<\/p>\n
\u201cThe key is turning savers into investors to help develop capital markets, in our view,\u201d they said. \u201cThat could create a positive feedback loop \u2013 greater wealth could spur stronger consumer spending and thus boost growth.\u201d<\/p>\n
\u201cWe are neutral European stocks but see many selective opportunities,\u201d they said. \u201cWe don\u2019t think Europe needs total success on every front to turn a page, just a dedication to pushing forward reforms and not just in crisis moments.\u201d<\/p>\n
On a more granular level, the strategists have a preference for the healthcare sector, which they argue benefits from strong cash flows and AI adoption.<\/p>\n","protected":false},"excerpt":{"rendered":"European equity outperformance is unlikely to last without fundamental changes, according to the BlackRock Investment Institute. Strategists at…\n","protected":false},"author":2,"featured_media":596240,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5174],"tags":[3400,187385,2000,299,5187,7065,43654],"class_list":{"0":"post-596239","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-eu","8":"tag-blackrock","9":"tag-blackrock-investment-institute","10":"tag-eu","11":"tag-europe","12":"tag-european","13":"tag-european-stocks","14":"tag-us-stocks"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/115619286466886988","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/596239","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=596239"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/596239\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/596240"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=596239"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=596239"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=596239"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}