With Brexit Uncertainty and Sluggish Growth, Where Are European Investors Seeking Value?

The desk is framing the current investing climate in Europe as one marked by significant uncertainties stemming from Brexit and an economic slowdown. According to insights from Goldman Sachs, the primary concern for European clients is identifying viable paths to return amid these turbulent conditions. Investors appear anxious about macroeconomic and political factors, with many examining potential Brexit scenarios and how these will potentially impact equity markets and returns across asset classes. Per the full note source, Goldman Sachs highlights that clients are increasingly active in seeking alpha opportunities, a task complicated by the current market malaise and sluggish growth figures in the region.

What the desk is arguing

The increasing unease among European investors stems from both Brexit-related uncertainty and broader economic stagnation affecting growth prospects. This is compounded by fears that current political climates may hinder investment returns, making allocation strategies vital in these conditions. Per the full note source, Andrew Wilson of Goldman Sachs notes that the primary concern among clients is achieving sustainable returns amidst this unpredictability.

Goldman further points to a marked slowdown in Europe’s economic performance, indicating that many investors are forced to reassess their strategies under these conditions. This aligns with recent data indicating that Eurozone growth is at its weakest since 2013, with GDP growth hovering around 0.1% in early 2019, reinforcing the urgency for investors to pivot their strategies effectively.

Where it sits in our coverage

Currently, our consensus targets for the EUR/USD pair stand at 1.075, within a range of 1.04 to 1.12, as we see varying forecasts from key market players. Specific targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)

The desk's view is slightly conservative, sitting closer to the lower end of the range, reflecting a more cautious outlook amid the prevailing market uncertainties.

How firms align with this view

consensus1.0750range1.0400–1.1200

Aligned with the desk view

JPMMar26 1.1000

Contrary positioning

BofAMar26 1.0400

Key takeaways

01European investors face ongoing challenges due to Brexit concerns and economic slowdown.
02The search for alpha is becoming increasingly difficult in the current market environment.
03Goldman Sachs highlights a primary focus on sustainable returns amid prevailing uncertainties.
04Eurozone growth is at its weakest since 2013, demanding strategic investor pivots.

Market implications

Traders should closely monitor the EUR/USD pair as it responds to new developments in Brexit negotiations and Eurozone economic data releases. A stabilization above 1.075 could signal a bullish outlook, while any drop towards 1.04 would suggest a stronger bearish sentiment, influenced by ongoing economic indicators.

Risks to this view

A shift in the Brexit landscape, particularly any definitive political resolution or economic stimulus policies from the ECB that could spur growth, would invalidate the current cautious approach. Additionally, any sign of resilience in economic data that suggests a recovery could cause a reassessment of targets and positions.

From our office in London, this episode is all about Europe's investing environment, including how investors are preparing for possible Brexit scenarios, drivers of the region's economic slowdown and where clients are finding alpha. "The number one issue that clients in Europe are facing is how do we get returns," says Andrew Wilson, CEO of Goldman Sachs Asset Management for Europe, the Middle East and Africa, who explains how both macro and political uncertainties are weighing on investors' minds. This podcast was recorded on March 5, 2019. The views and opinions expressed herein should not be construed as an offer to buy or sell any securities and such views and opinions may differ from those of Goldman Sachs Global Investment Research or other departments or divisions of Goldman Sachs and its affiliates.

This information may not be current and Goldman Sachs has no obligation to provide any updates or changes. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty, as to the accuracy or completeness of the statements or any information contained in this podcast and any liability therefore (including in respect of direct, indirect or consequential loss or damage) is expressly disclaimed. Goldman Sachs is not providing any financial, economic, legal, accounting or tax advice in this podcast.

In addition, the receipt of this podcast by any listener is not to be taken as constituting the giving of investment advice by any Goldman Sachs entity. The portfolio risk management process includes an effort to monitor and manage risk but does not imply low risk. Copyright 2019 Goldman Sachs & Co.

Visit megaphone.fm/adchoices

Sources & References