European Equity Strategy 3Q 2018


Key Takeaways

  • In the third quarter of 2018, our European Equity strategy slightly underperformed the MSCI Europe Index, which generated modestly positive returns.
  • After gaining momentum in 2017, the European Union (EU) economy’s growth rate has slowed in 2018. Consumer and business confidence fell in September, decreasing for the ninth consecutive month. The region faces risks stemming from Italy’s budget deal and Brexit negotiations, and uncertainty around the future of trade hindered economic growth.
  • The strategy’s information technology holdings were the most significant drivers of relative performance. Our lack of exposure to telecommunications, among the benchmark’s weakest performers, also positively impacted attribution. Our consumer discretionary and industrials holdings detracted from relative returns.
  • Uncertainty in Europe is evident in growing political instability and diverging economic health among countries. As the ECB cuts back on its bond buying program and eventually raises rates, the tide of money will retreat. We would not be shocked to see a re-pricing of risk assets. It is this concern, among others, that has generally kept us from investing in the European periphery, as well as its financials and highly-levered companies.
  • Despite the rise of populists in Europe, trade fears brought about by the U.S., and the end of an extremely accommodative monetary policy, we continue to remain bullish on the powerful businesses in which we are invested.

Trailing Returns: European Equity Composite(As of 09.30.2018)

Calendar Year Returns

Source: NorthernTrust
All results portrayed are expressed in U.S. dollars. Periods under one year are not annualized.
Past performance is not necessarily indicative of future results. For full disclosure and for further information regarding comparison to an index, see the Disclaimer and Performance Disclosure.

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