Historically U.K. equities have outperformed European equities during periods of market weakness due to the U.K. market’s weighting in classic defensive groups. However, the outperformance this go-round is due to the financial sector. The U.K. banking subsector was boosted by acquisition activity and investors’ preference for U.K. banks’ low volatility, high dividend yields, and strong…
Although valuation metrics show mixed results, we remain cautiously optimistic about investing in European and U.K. equities.
In the United Kingdom inflation is under control but increasing, driven by strong consumer spending and rising oil and housing prices.
An analysis of the rapidly expanding private equity markets in the U.K. and continental Europe using the following criteria: sources of capital, market segments, valuations, leverage, and exit environment. Also included are summaries of individual country markets and exhibits covering capital commitments, EBIT purchase multiples, IPOs, M&As, and distributions to limited partners.
U.K. investors, although weary of high global equity correlations and the recent outperformance of U.K. equities, should not decrease their non-U.K. equity allocations for the following reasons: correlations have varied widely and could fall again; and U.K.-only mandates sacrifice 90% of the available opportunity set, represent relatively concentrated portfolios unless they take on significant tracking…
Equity ownership remains low in Europe due to undeveloped public equity markets, generous pension plans, and the lack of tax incentives. European bulls cite the following to argue that ownership will rise: (1) the bull market of the late 1990s raised awareness of equities, (2) with falling interest rates, Europeans are looking to equities for…
Three factors are critical in improving the prospects for the United Kingdom and Europe: a recovery in the U.S. economy, continued strength in U.K. consumer spending, and structural improvements in continental Europe. Although bond and equity markets have priced in expectations for a global economic recovery between the middle to end of 2002 because evidence…
European investors are increasingly moving into bonds. Provided the economic downturn does not generate a higher than expected level of defaults, the high-yield market should provide opportunities for those able to tolerate a higher degree of risk. For the more staid, the embryonic euro inflation-linked bond market and U.K. corporate inflation-linked bond market provide opportunities…
Small-cap stocks in the United Kingdom and Europe are attractive because they provide added diversification within domestic, not global, markets. In addition, their valuations are more attractive than those of their large-cap brethren.
With world markets mired in a severe synchronised slowdown, the long-term outlook for U.K. and continental European equities remains uncertain. While capital markets may take short-term comfort in further interest rate cuts by the European Central Bank and the Bank of England, extra liquidity and lower borrowing costs may not be enough to encourage nervous…