As Christmas approaches, many of us happily turn our attention to our couch and TV, taking time to watch any number of Christmas classics, including “The Year Without A Santa Claus,” “It’s A Wonderful Life” and, of course, “Christmas Vacation.” While “Christmas Vacation” is always worthy of our time and a few laughs, for this late-December weekly wire we are actually more interested in another Griswold family farce, “European Vacation” – “Look kids! Big Ben, Parliament!” – as it appears Europe’s economy and markets are taking a turn for the better.
For years, Europe has more often than not proven to be a point of concern for investors. Consider, the European debt crisis of earlier this decade; political instability in Italy and the UK (e.g. Brexit) and disappointing economic performance, particularly of late as the US/China trade dust-up weighed on global growth, a pernicious development for Europe’s export-oriented economic model. While Europe continues to face structural headwinds – particularly on the demographic and fiscal fronts – there has been some encouraging news out of the Old World. The UK election has cleared away some of the uncertainty around the UK/EU relationship, and it looks like the former will be leaving the latter in 2020; Eurozone services activity has been accelerating; and German manufacturing activity, while weak, seems to be bottoming. Most importantly, the Phase 1 US/China trade deal should prove a positive catalyst for global investment and trade into the new year. Beyond improving economic fundamentals and a more constructive macro backdrop, we take comfort in the recent performance of European risk assets, as sovereign bonds move lower and yields higher, and pan European indices make multi-year – or even all-time – highs as investors price in a more encouraging outlook for the Continent.
Brinker Capital has been adding to our developed international – including European – and emerging international equity exposure. Valuation has been and remains quite attractive and many investors are under-allocated to both asset classes. With a bit of help from US/China relations, ex-US equities could rally nicely through 2020.
The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital, Inc., a registered investment advisor.
