Quarterly Commentaries

European Equity Strategy 4Q 2017


Key Takeaways

  • The European Equity Strategy outperformed the MSCI Europe Index in the fourth quarter and the one-year period ending December 31, 2017.
  • Europe’s economic momentum continued to build steam as GDP increased and unemployment improved amid a mild inflationary environment, despite noise around Brexit, immigration, Polish nationalism and Catalonian independence. The ultra-low rates of the European Central Bank (ECB) continued to provide substantial support across all Eurozone countries. The broad equity market was mildly positive in the fourth quarter and performed strongly throughout 2017 with market volatility presently at historically low levels.
  • Our stock selection in the Health Care sector was the leading contributor to relative returns, with outperformance from niche holdings such as French-based Essilor International. Relative performance was also led by our Industrials and Information Technology holdings. Our lack of exposure to the Energy sector and our underweight to the Materials sector detracted from relative returns over the quarter.
  • The ECB has begun tapering its QE program and economic growth could lead to accelerated interest rate normalization. Brexit trade negotiations have begun and Italy has a general election upcoming where the future direction of the 4th largest economy in the region remains unclear.
  • We remain steadfast in our approach of seeking to invest in high quality businesses with consistent, predictable earnings growth-at sensible prices. We believe that this approach has served our clients well through the cycle, especially during periods of market volatility, and we expect it to perform similarly in the future.

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