I'm Tom Banks. Portfolio Manager at Federated Investors.
How do current events such as Brexit and trade and tariff talks affect European equities?
Markets don't like uncertainty, and there's no question that the level of uncertainty increased over the last couple years starting with Brexit two years ago, and now more so with trade uncertainty within the Eurozone. Make no mistake about it, there's also been a real economic impact seen. When you look at the growth rates between the Eurozone and the United States, they've been diverging culminating this year with the Eurozone growing at half the rate that the United States is. We've also seen the dollar begin to appreciate against the Euro, and even on a company level, we've seen several companies now come out and lower their outlooks based on trade uncertainty. We do see some positives starting to emerge starting with Brexit where we are getting close to the deadline and headlines have indicated that the Eurozone and the UK are getting closer to an agreement. One of the biggest points of contention was around the Irish border, and it does seem like there has been progress made on that front, so we are looking forward to an agreement in the coming months with...with Brexit, and amongst all this uncertainty, we have seen equity valuations within particularly the Eurozone start to become more attractive. Therefore, we believe going forward the outlook is starting to improve for international equity markets as a lot of these overhangs are temporary.
Views are as of 10-10-2018 and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector. International investing involves special risks including currency risk, increased volatility, political risks, and differences in auditing and other financial standards. Federated Global Investment Management Corp. 18-76260 (10/18)