'I bet on UniCredit, a solid company in the long run'
Banks benefit from solid earnings, capital generation and capital requirement reforms, while trading at attractive valuations
3' min read
Key points
3' min read
The global geopolitical situation remains uncertain, yet equity indices continued to rise. "We believe that a positive combination of economic and market factors should support a more favourable environment for European economies. Although uncertainty persists, we believe upside opportunities outweigh downside risks." Thus begins Robert Schramm-Fuchs, portfolio manager of the European equity team at Janus Henderson.
What can we expect in the coming months?
One of the main issues of concern for European investors is the tariffs and trade negotiations. Although some complexities remain, we expect any agreement between the EU and the US to have a limited long-term impact on European equities. Despite recent outperformance, European equities continue to trade at a significant discount to their US counterparts. In our view, this factor, combined with the low positioning of international investors, provides a margin of safety in terms of valuation.
After years of US market dominance, it seems that European markets are back in the spotlight. Are these temporary factors or are we witnessing a positive structural change in Europe for equity markets?
European equities outperformed in 2025 and we believe this could mark the beginning of a more lasting change. Our belief is that the economic and geopolitical pressures facing Europe are acting as catalysts for reform. Germany's infrastructure and defence packages, which effectively end its budget deficit, signal a growing urgency to address long-standing structural issues. Across the EU, initiatives are underway to lighten financial regulation, promote capital market union, and cut red tape. These reforms are not dependent on external factors such as US trade policy or the resolution of the geopolitical crisis in Ukraine. Rather, they are driven by Europe's capital and savings, resources that are already available but historically underutilised. If successfully unlocked through deregulation, these funds could provide a significant boost to European GDP. Although the benefits will take time to materialise, we believe they are not yet reflected in investor positioning or valuations, offering significant upside potential.
What sectors should you focus on?
.We find the European banking sector and semiconductors particularly attractive. Banks benefit from solid earnings, capital generation and reforms in securitisation and capital requirements, while still trading at attractive valuations.
In contrast, semiconductors are showing the first signs of a cyclical recovery, driven by revenue growth and memory prices.
