Europe as a bargain

European equity markets remain cheap. In terms of cyclically adjusted price earnings ratio, CAPE, Today, Europe traded at the end of March at 20.4x versus 28.2x in the US. This means Europe’s CAPE valuation today is 28% below the US, a discount nearly double the 15% historical average discount since 1981. Historically, such high discounts have led to strong outperformance of Europe versus the US market. In terms of individual markets, the cheapest right now are Poland, Germany and Sweden. While Poland remains a special case due to geopolitics, Germany and Sweden look particularly attractive to us right now. In our European portfolio, we hold companies like Fresenius, Adidas, Sandvik or Ericsson. They definitely look too cheap to ignore.