30 July 2020
Over the last five years, European equity markets have underperformed global equities (Figure 1) due to political and economic issues spawned by the GFC. Fiscal austerity, a dysfunctional banking sector and low lending growth combined to produce a slower recovery in economic activity and profitability than other parts of the world. This was compounded by persistent Brexit uncertainty, political stalemates in Italy and Spain, and US-China trade tensions. Then in the first part of 2020, COVID-19 put the brakes on economic activity. Such tough times, however, have led to bold policies.
The dramatic policy response appears to have put a floor under capital markets and laid the foundations for a recovery as lockdowns ease. As part of this three-part series, we consider current developments in Europe and why they make Europe a particularly interesting region for investors now.