Ralph Orlowski | Getty Images
Frankfurt’s skyline as viewed from the top floor of the new European Central Bank (ECB) headquarters
Looking at the broader macro picture, Lagrange says that after focusing on a litany of issues from the political to the economic in recent years, investors have now stopped looking for excuses to avoid putting money to work in European equities.
“You have a central bank that is unlikely to taper significantly, you have growth that is actually ticking up, you have confidence that we haven’t had for a very, very long time on mainland Europe – and we can’t forget how close we were to a disastrous and economically destructive outcome of the French election,” highlighted Lagrange, arguing that given this backdrop, the region’s momentum could continue for some time.
“You still can see that we’ve got a lot to claw back to get back to any significant exposure to Europe,” he added, pointing to the gap in both investor allocations and valuations between U.S. and European equities, which has narrowed in recent weeks but remains pronounced.
Indeed, the recent spurt of enthusiasm for rotating from U.S. into European equities was highlighted in Bank of America Merrill Lynch’s Fund Manager Survey for May which showed that 82 percent of respondents now see the U.S. as the most overvalued region, while European equities are now enjoying their highest allocations since March 2015.