Are Europe’s dog days over?

Boasting a broadly improving macroeconomic environment, the prospects for Europe are on the turn. What’s more, the investment case for the region is too good to ignore, explains Ian Ormiston, manager of the Old Mutual Europe (ex UK) Smaller Companies Fund.

The European tide is turning. After years of relative stagnation, the backdrop for European equity investors is now a handsome one.

The European stock market is currently trading at a discount to the likes of the US and, historically at least, such a valuation differential has been perfectly justified. Long dogged by the institutional intricacies and vagaries that come with being entwined with the European project, the unknowns have always out- numbered the certainties. And while today sees European equities still cheaper than their US peers – the European equity market is trading on a forward p/e ratio of 15x versus the US market p/e of 18.3x1 – this seems to be unfairly swayed by the prevailing political winds that gust across the continent.

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