Strategies for Investing in European Market Recovery

Pass the Prosciutto, Please A decade ago, “PIIGS” was a acronym for 5 fiscally challenged European countries: Portugal, Ireland, Italy, Greece, and Spain. The press and financial analysts referred to these proud countries with a negative tone, at the same time that Marathon Asset Management's European Credit team invested capital in these countries, identifying incredibly attractive investments during this time period. Amazing people, proud heritage, yet difficult times for these great countries. Today, they are recognized as rising stars of Europe with some of the fastest growing economies in the EMU. This transformation stands as a testament to economic resilience that was overcome from the 2010-2012 eurozone sovereign crisis. These 5 great nations confronted their respective funding crisis to make adjustments with sovereign debt-to-GDP exceeding 100% in most cases while unemployment soared, and a banking system required several hundred billion Euro bailout packages. The troika's intervention (European Commission, ECB, and IMF) in Greece, Portugal and Ireland led to pension reform, tax increases, labor market liberalization, and a structural rework that created the backdrop for today's success, even more impressive given the popular protests and political upheaval that took place. The turnaround has been nothing short of remarkable. Ireland became a tech and pharma hub with 5% GDP growth. Portugal grew from not only tourism, but also a thriving start-up community and development of clean energy; Spain's unemployment fell from a staggering 27% to single digits. Greece achieved primary budget surpluses and regained investment-grade status leveraging its agriculture and shipping advantage, while Italy with so many natural advantages is most noted for its fiscal discipline. The market recognize the progress, growth and value of these countries and investors are being well rewarded. 2025 Equity Market Performance (y-t-d): Greece +56% Spain +52% Portugal +42% Ireland +39% Italy +38% Europe’s remarkable recovery is one of the most dynamic and resilient investment opportunities globally, delivering highly attractive risk-adjusted returns from strong European companies at valuations that still look compelling versus the U.S. As a credit investor, I’m more excited than ever to invest capital here, a vibrant continent, a perfect complement to the U.S. and diversifier for a global portfolio.

🌍🏢 Across Europe, demand for more and better housing is soaring, and at the same time European cities need to update their economies, lower emissions, revive nature, and increase resilience. #UrbanRegeneration – transforming under-used land and obsolete buildings into compact, vibrant places to live, work and do business – has the potential to meet these combined needs, driving significant long-term value. Indeed, we believe urban regeneration represents a major – and untapped – opportunity for investors, at €4 trillion over the next 15 years. In this Systemiq Ltd. white paper, published for Ginkgo Advisor and Edmond de Rothschild, we set out the environmental, social, and economic case for urban regeneration, discuss key misconceptions and barriers, and outline what investors must do to seize the opportunity. 🔹Key takeaways: * Private capital drives success: Regeneration is not just a public sector play; increasingly it is private investors and developers – collaborating effectively with city organisations – that are leading the way to success. * Supply and demand are strong: Demand for housing and mixed-use spaces in attractive cities is soaring. Brownfield sites representing 19,000km2 – an area bigger than Beijing – can meet most, if not all, of this demand over the next 10-15 years. * Unique social and environmental benefits: Projects reduce carbon emissions by limiting urban sprawl and leveraging public transport networks. They are also more suitable for shared clean energy solutions such as district heating and can drive urban greening through mixed-use placemaking.  * Low risk, if done well: There are higher risks at the start, but well-executed projects see excellent long-term utilisation and yield, offering investors solid, mid-teen returns with diversified income sources across multiple asset classes. Investors with a long-term interest in urban economies, real estate and infrastructure need an urban regeneration investment strategy, and a clear plan for tapping into the opportunity. To do this, investors should take four steps:  1. Treat urban regeneration as a dedicated asset class  2. Strengthen mechanisms to address early-stage project risk  3. Build a pipeline of high-potential projects and partnerships  4. Prioritise projects with a strong focus on placemaking to create lasting economic, social, and environmental value ▶️ See the full analysis: https://lnkd.in/eKqSDAiy   #InvestmentOpportunities #Europe #RealEstate #InstitutionalInvestors #SustainableInvesting

Germany's Historic €1 Trillion Fiscal Pivot: Positive for both Germany and the Rest of Europe Germany has announced one of the most significant economic policy shifts in Europe since reunification. Under chancellor-designate Friedrich Merz, the longtime champion of fiscal discipline is abandoning its austere approach with a €1 trillion spending plan focused on infrastructure, defense, and economic revitalization. Markets reacted dramatically: • Euro surged to $1.08, highest since early November • German 10-year bond yields jumped 30 basis points – worst sell-off since 1990 • DAX benchmark rose 3.4%, best performance in nearly 2.5 years • Construction stocks and banks saw massive gains (15%+ for companies like Kion) This isn't a crisis response but a strategic geopolitical calculation amid uncertainty about America's commitment to European security under Trump's return. The move could boost German growth to 1.5-2% by 2027, reversing its "sick man of Europe" status. For investors, opportunities abound in defense, infrastructure, and green energy sectors, though higher rates may persist if inflation follows. Despite market enthusiasm, political hurdles remain as Merz faces resistance within his own party to this dramatic reversal of Germany's fiscal conservatism. If successful, this marks the beginning of a new era of European fiscal activism with profound implications for global markets and the future of the European project. #EconomicPolicy #EuropeanMarkets #FiscalPivot #GermanEconomy #InvestmentOpportunities

Is It Time to Upgrade Europe? My team and I at BCA Research have recently shifted our stance, moving away from our long-held underweight position on European equities relative to the US. Here’s why: Pessimism toward European stocks is pervasive—and fully priced in. Even after accounting for sectoral biases, European equities trade at a record discount to their US counterparts. This valuation gap offers a compelling margin of safety that’s absent in the US market. Take this morning as an example: news of China’s progress in developing an open-source AI model shook US markets, revealing the fragility of the moat protecting US AI-focused companies and their "pick-and-shovel" plays. In contrast, Europe’s narrative is changing beneath the surface. While many still view Europe as an “open-air museum” bogged down by regulators, that narrative is outdated. Since the release of the Mario Draghi report in September, there has been a noticeable shift: - Deregulation and simplification efforts are gaining traction across the continent, from Brussels to national capitals. - Europe remains home to global champions in various industries—not just automakers, but leaders across diverse sectors. Additionally, it’s worth noting that European consumer discretionary stocks are looking increasingly attractive. Their overvaluation has faded, and earning expectations have become overly pessimistic. In short, the time to rethink Europe’s equity story is now. For a deeper dive into the investment opportunities offered by EUropean markets, please click here (behind paywall): https://lnkd.in/e9U_ek6m #S&P500 #EUROSTOXX, #US #Equities #Europe #AI #DeepSeek #BCAresearch