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Donny Kranson talks about UK elections, fiscal stimulus, growth vs value investing, ESG issues and positioning for opportunities in 2020.
Decisive British elections, easing international trade tensions and stabilizing European economies helped drive sentiment and underpin European markets in the fourth quarter. While the macro outlook is potentially less uncertain, little has changed from an individual business perspective.
The Conservative Party election victory in the UK has removed the immediate threat of the country crashing out of the EU, as well as a potential nationalization and share redistribution agenda under the Labour Party. Progress on Brexit negotiations should underpin the sterling, the UK economy and markets more broadly. Large-scale fiscal stimulus in Europe, and Germany in particular, remains unlikely. Instead, a resolution to Brexit and the international trade war should provide a greater boost to exporting companies.
Higher valuations do not mean that growth stocks are overvalued, although future returns could be lower than in the past. In this environment, investors need to look closely at each company individually. One area in which Europe is leading is ESG. Large multinationals are actively addressing issues like plastic waste, potentially creating wins for the company, the consumer and the planet.