Quarterly Commentaries

European Equity Strategy 3Q 2017


Key Takeaways

  • In the third quarter of 2017, the European Equity Strategy delivered positive returns, but underperformed the strong performance of the MSCI Europe Index – consistent with our quality growth investment style.
  • Across Europe, unemployment rates are coming down, GDP growth is accelerating and consumer confidence has risen. Politically, the worries from earlier in the year regarding the rise of populist leaders in large European countries have largely abated. On the other hand, Spain is battling to remain whole and the Brexit path remains unclear. The whole region continues to benefit from the ECB keeping rates low.
  • Our European Equity Strategy’s absolute returns were driven primarily by our holdings in the Industrials and Information Technology sectors. However, in market relative terms, our Consumer Staples and Consumer Discretionary stocks underperformed the market, and our relative performance was also pulled back due to our lack of exposure to the Energy sector, which enjoyed a strong quarter.
  • While the tide appears to be turning in Europe, a stronger euro would act as a headwind, particularly for multinationals with large foreign earnings. Over the longer term, European markets provide an attractive group of truly world class companies, many of which are multinationals with long histories and durable competitive advantages.

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