Investment Insights A Contrarian View on Europe

Invesco

Research

8 Pages

Invesco outlines a contrarian case for European equities in 2019, arguing that extreme investor pessimism has pushed valuations below fundamentals despite a still-functioning economic backdrop. With 60% of fund managers expecting slower growth, the paper suggests sentiment may already reflect recession-like fears that could prove overstated.

Key Takeaways

Extreme Bearish Sentiment: Around 60% of global fund managers expect growth to slow, matching recession-era pessimism despite ongoing expansion and supportive domestic demand in Europe.
Valuation Disconnect Persists: European equities trade well below 2017 levels even as key trade flows remain strong, including $570bn US exports to the EU and $670bn in return flows.
Policy Risks Overstated: Concerns around trade wars and China slowdown dominate, yet policy responses like stimulus and reduced tightening suggest downside risks may already be priced into markets.
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