Opportunity knocks: Europe

Chad Padowitz

Talaria Asset Management

Since late last year we’ve viewed 2021 as a year of potential and opportunity in global equity markets. While a lot of focus has been on the US and the mega-cap Tech companies dominating indices,  Europe has lagged with economic headwinds from renewed social restrictions associated with COVID, while the region’s disproportionately large exposure to the leisure and tourism sector has caused relative earnings momentum to be poor. 

However  these conditions provide some of the best opportunities for investors –with the region in aggregate being cheap vs its own  10-year history. In addition to this there are 4 good signs things are beginning to turn around: 

1. Enormous stimulus is likely to be a significant tailwind, with growth set to continue its acceleration.    

2. COVID is abating and vaccine roll out is accelerating in the Eurozone. 

3. Tourism and Leisure is an outsized percentage of the Eurozone economy – so the region will get an outsized boost as reopening takes place.

4. The bounce in global manufacturing PMI’s signals a strong rebound in the manufacturing sector which will help Eurozone exports, which make up 45% of the nominal GDP of the region. 

Coupled with absolute and relative low company valuations, the region is well set to be reassessed by investors in the coming 6 months.

As an added bonus - the region is likely to disproportionately benefit were there to be even a small amount of sustainable inflation.

The UK may have left, but there are still plenty of opportunities. 

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The information in this article is general information only and is not based on the objectives, financial situation or needs of any particular investor. In deciding whether to acquire, hold or dispose of the product you should obtain a copy of the current Product Disclosure Statement (PDS) for the Fund and consider whether the product is appropriate for you. Wholesale Units in the Talaria Global Equity Fund (the Fund) are issued by Australian Unity Funds Management Limited ABN 60 071 497 115, AFS Licence No. 234454. Talaria Asset Management Pty Ltd ABN 67 130 534 342, AFS Licence No, 333732 is the investment manager and distributor of the Fund. References to “we” means Talaria Asset Management Pty Ltd, the investment manager. A copy of the PDS is available at australianunity.com.au/wealth or by calling Australian Unity Wealth Investor Services team on 13 29 39. Investment decisions should not be made upon the basis of the Fund’s past performance or distribution rate, or any ratings given by a rating agency, since each of these can vary. In addition, ratings need to be understood in the context of the full report issued by the rating agency itself. The information provided in the document is current at the time of publication.

Chad Padowitz
Co-Chief Investment Officer
Talaria Asset Management

Chad is the Co-Chief Investment Officer and co-founder of Talaria Asset Management. He has more than 21 years of experience in the financial services industry in the UK, South Africa and Australia. Talaria's investment strategy seeks to increase...

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