Quarterly Commentaries

European Equity Strategy 2Q 2018


Key Takeaways

  • In the second quarter of 2018, our European Equity strategy outperformed the MSCI Europe Index. Our concentrated portfolio of companies that we believe have stable and consistent earnings growth weathered the increasingly volatile environment.
  • The quarter was marked by a shift to risk-off in a number of markets. Concerns that prompted a change in the outlook included the U.S. continuing to lift rates on the back of accelerating inflation, a continued rise in oil prices, growing momentum of the anti-immigrant political voice in Germany and Italy threatening EU political status quo, and U.S.-initiated trade negotiations appearing set to impose tariffs, with the EU and China both threatening retaliation.
  • From a market-relative standpoint, our industrials holdings were top contributors to performance. The strategy’s large underweight to poorly performing banks in Spain and France further helped relative returns. Our consumer staples holdings were negatively impacted by a sell-off in tobacco companies.
  • Our focus has always been on the resilience of the businesses we own. This discipline is not rewarded in every period. For a while, the market was fixated on companies’ current growth, irrespective of its sustainability. This year, some risk appreciation is coming back, which we see as a healthy development. We believe our evergreen quality growth discipline should hold our investments in good stead in today’s market, as it has done over the past two decades.

Trailing Returns: European Equity Composite(As of 06.30.2018)

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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