Despite the strong recent rally, European equities are still underperforming their U.S. counterparts by almost 15 percent versus year-ago levels and look relatively cheap on valuation levels - an opportunity for investors seeking to bet on U.S. growth.
“The current price-to-book multiple for the FTSE Europe ex UK Index stands at only 1.3 times, compared to 1.7 for the FTSE 100 and 2.2 for the S&P 500,” Neil Wilkinson, manager of the Royal London European Growth Fund, says.
“This offers the investor a chance to gain exposure to sectors - such as automotives and consumer goods - that benefit from the U.S. recovery and emerging market growth, at an inviting price level.”
He adds that a weaker euro and better global growth also serve to brighten the prospects for European equities, while domestic politics and structural imbalances remain a drag.
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