The writer is chief market strategist for Europe, Middle East and Africa at JPMorgan Asset Management
Is this the beginning of a period of European exceptionalism in markets? Six months ago, most investors would have thought the idea absurd, even more so once Donald Trump was re-elected to the White House and on a mission to Make America Great Again. But in euro terms, the MSCI Europe index is up 9 per cent in the year to date compared with the S&P 500’s decline of 9 per cent. Investors are questioning whether the tide is turning. It may well be.
Europe’s decade of equity market underperformance was caused by relative macroeconomic weakness, and the “wrong” sectoral composition. Let’s take these in turn. Naysayers will argue Europe’s economic problems are structural. Demographics aren’t conducive to strong growth and Mario Draghi, in his paper on Europe’s competitiveness, did a super job of highlighting the problems that come from the continent’s fragmentation.