“Europe’s economy is certainly not without challenges. The war in Ukraine is an overhanging uncertainty, and while the worst of the energy crisis appears to be behind us, lingering inflation and higher interest rates are bearing down on consumers and investors alike.

But, Europe is home to many quality companies, which sell their wares globally and can therefore succeed despite the domestic backdrop. Shares in these companies invariably come cheaper than their US counterparts.

Europe is full of companies that “make stuff”, an attribute which was highly unfashionable during the previous decade, when the hype of Silicon valley and “asset light” business models combined with the free money regime to capture the market zeitgeist. But, the decade ahead looks very different.

It looks very asset intensive. Onshoring, automation, digitalisation, electrification and AI are long-duration themes which will benefit the enablers – Europe’s “Global Champions” – which are quietly labouring away to bring greater efficiency to companies, shorten supply chains, and expand manufacturing capacity in the Western World.

In a multi-polar age of higher interest rates, higher inflation and a return to fundamental value as the bedrock on investment, European equities should feature more prominently in asset allocation decision-making.”
Tom O’Hara, Portfolio Manager, Henderson European Focus Trust > 

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