The appeal of Europe

Advertising Material for professional investors only*

Many have called for the outperformance of European equities as they once did for Japanese equities over the past few years. The reality has been mixed. The question now is whether it is time to increase exposure to Europe and the Nordics in a world where many equity markets are very expensive. The answer is most likely yes.

European earnings should start to strengthen with demand

Europe, like the US, is going through an economic recovery but inflation is lower than in the US and is showing signs of easing on the back of improved supply chains. There is also far less evidence of a wage inflation spiral. Indeed, the Eurozone economy is running too hot but far less than the United States. The outcome is that earnings should probably surprise positively this year in part on the back of stronger demand and controlled costs. One reason this is likely to happen is that consumers are steadily becoming more confident not only about growth, but about the long-term prospect for the Eurozone as we move away from a long period of crisis (from the Peripheral crisis to the Pandemic). Another factor is that innovation is starting to pick up all across Europe from the Nordics to the south. The last element is that while monetary policy could tighten, it should remain ample and this is in stark contrast to the United States. The net outcome of this is that the euro should stay somewhat weak relative to the dollar and is expected to stay south of 1.20.

The value tilt in an expensive world

>European equity has a tilt towards Value and Cyclical which for a long-time meant that US equities, with their Growth and Quality factors, were more in demand. Now, Value/Cyclicals should benefit ever more from rising demand and fear that the Growth/Quality investment styles are very expensive (which is very sensitive to higher interest rate yields). A probably better earnings profile linked to better demand should also help. What should support this is the rapid digitalization of Europe supported by the European Union. More importantly, many reforms were delayed by the crisis and are likely now to come to the fore.

The question is why buy now? Europe is starting to reinvent itself through digitalization and Green policies to become more agile. Long-term low interest rates support the development of new technologies which are often long-term bet on the future. AI policies have been deployed by the EU, for example, and the race to catch-up with the US and Singapore should rapidly heat up. We are simply at the beginning of a new style European economy that should over time be as productive and innovative as the US economy but far more egalitarian, influenced by Nordic values. Companies which for decades preferred to develop in the US or Asia are going to start developing operations at home. That change in belief in long-term European growth may oscillate over time, but as stock prices rise it should comfort CEOs into investing more at home leading to a self-fulfilling cycle.

What does it mean?
Within Europe, we see that Nordic countries equities have long outperformed with their emphasis to global growth and the quality of the companies involved. We expect this to continue.

Nordea Asset Management is the functional name of the asset management business conducted by the legal entities Nordea Investment Funds S.A. and Nordea Investment Management AB (“the Legal Entities”) and their branches and subsidiaries. This document is advertising material and is intended to provide the reader with information on Nordea’s specific capabilities. This document (or any views or opinions expressed in this document) does not amount to an investment advice nor does it constitute a recommendation to invest in any financial product, investment structure or instrument, to enter into or unwind any transaction or to participate in any particular trading strategy. This document is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instruments or to participate to any such trading strategy. Any such offering may be made only by an Offering Memorandum, or any similar contractual arrangement. Consequently, the information contained herein will be superseded in its entirety by such Offering Memorandum or contractual arrangement in its final form. Any investment decision should therefore only be based on the final legal documentation, without limitation and if applicable, Offering Memorandum, contractual arrangement, any relevant prospectus and the latest Key Investor Information Document (where applicable) relating to the investment. The appropriateness of an investment or strategy will depend on an investor’s full circumstances and objectives. Nordea Investment Management AB recommends that investors independently evaluate particular investments and strategies as well as encourages investors to seek the advice of independent financial advisors when deemed relevant by the investor. Any products, securities, instruments or strategies discussed in this document may not be suitable for all investors. This document contains information which has been taken from a number of sources. While the information herein is considered to be correct, no representation or warranty can be given on the ultimate accuracy or completeness of such information and investors may use further sources to form a well-informed investment decision. Prospective investors or counterparties should discuss with their professional tax, legal, accounting and other adviser(s) with regards to the potential effect of any investment that they may enter into, including the possible risks and benefits of such investment. Prospective investors or counterparties should also fully understand the potential investment and ascertain that they have made an independent assessment of the appropriateness of such potential investment, based solely on their own intentions and ambitions. Investments in derivative and foreign exchange related transactions may be subject to significant fluctuations which may affect the value of an investment. Investments in Emerging Markets involve a higher element of risk. The value of the investment can greatly fluctuate and cannot be ensured. Investments in equity and debt instruments issued by banks could bear the risk of being subject to the bail-in mechanism (meaning that equity and debt instruments could be written down in order to ensure that most unsecured creditors of an institution bear appropriate losses) as foreseen in EU Directive 2014/59/EU. Nordea Asset Management has decided to bear the cost for research, i.e. such cost is covered by existing fee arrangements (Management-/Administration-Fee). Published and created by the Legal Entities adherent to Nordea Asset Management. The Legal Entities are licensed and supervised by the Financial Supervisory Authority in Sweden and Luxembourg respectively. A summary of investor rights is available in English through the following link: The Legal Entities’ branches and subsidiaries are licensed as well as regulated by their local financial supervisory authority in their respective country of domiciliation. Source (unless otherwise stated): Nordea Investment Funds S.A. Unless otherwise stated, all views expressed are those of the Legal Entities adherent to Nordea Asset Management and any of the Legal Entities’ branches and subsidiaries. This document may not be reproduced or circulated without prior permission. Reference to companies or other investments mentioned within this document should not be construed as a recommendation to the investor to buy or sell the same but is included for the purpose of illustration. The level of tax benefits and liabilities will depend on individual circumstances and may be subject to change in the future. © The Legal Entities adherent to Nordea Asset Management and any of the Legal Entities’ branches and/or subsidiaries.

Country selection

For more information about products in your area, please select a country below:


The information contained in these webpages is solely intended for professional clients.

Data, information and potential objectives released on these webpages are provided for information only.

Nothing in the information contained on these webpages shall be construed as an investment advice from NAM or any of its affiliated companies. The content of these webpages does NOT constitute i) a recommendation to invest in any financial instrument, financial product, investment structure or instrument, ii) tax or fiscal advice, to enter into or unwind any transaction or to participate in any particular trading strategy and (iii) substitute for user’ own research or their technical and/or business judgement based on their personal situation. These webpages are not an offer to buy or sell any security.

All publications, press release and other material including but not limited to video, brochure presented or released on these webpages are presented “as is” and to the best of NAM ́s knowledge when issued.

By clicking on “Proceed” I confirm that I am a professional client and I have read, understood and accept the General Terms and Conditions and the Privacy Policy for this website.
*A Professional client within the meaning of the Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 as amended.