By Rob Burnett, Manager of the Neptune European Opportunities Fund
In recent weeks, the bear case for European equities has become more pronounced on the back of weaker-than-expected GDP data and deflation concerns. This softening in economic momentum has led some investors to question whether the ECB is behind the curve and indeed whether it has the requisite firepower in its armoury. We believe that these concerns have been overplayed by the market: European leading economic indicators are still largely stable and positive, whilse we also believe that there are a number of imminent catalysts that have the potential to be supportive for European equities.
Despite shrinking growth in Germany and a flatline in France, there is little evidence of a prolonged slowdown in eurozone growth, albeit we have seen some moderation. Our proprietary real-time GDP indicators (which are made up of between 55 and 75 data points) are stable in countries such as Germany and Italy. More importantly, however, is the disconnect between GDP and purchasing manager indices (PMIs), which should give reason for hope. Although Q2 GDP growth has been weak, the PMIs of Italy, Germany and Spain have all been in expansionary territory. We believe the reasons behind the weakness seen in Q2 can be attributed to ahead-of-consensus growth in European GDP in the first quarter. Of course, geopolitical risk has also played a part, particularly in relation to Germany.
Visit the Neptune European Opportunities Fund Page
Visit neptunebigideas.com for more market views and comment from Neptune.
Important information: This is not for retail clients. It is intended for investment professionals and is not for forward transmission.
The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations and your clients may not get back the original amount invested. Some information and statistical data herein has been obtained from sources we believe to be reliable but in no way are warranted by us as to their accuracy or completeness. References to specific securities are for illustration purposes only and should not be taken as a solicitation to buy or sell these securities.
Forecasts are not a reliable indicator of future performance. This fund may have a high volatility rating and past performance is not a guide to future performance. Neptune funds are not tied to replicating a benchmark and holdings can therefore vary from those in the index quoted. For this reason, the comparison index should be used for reference only.
These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you as to any change of our views. This is not a solicitation or an offer to buy or sell our funds. All information is given in good faith but without any warranty. Neptune does not give investment advice and only provides information on Neptune products.