Since the Eurozone crisis began unfolding back in 2009, investors have been cautious about the region. This was understandable, given that it lurched from crisis to crisis every week, and Portugal’s, Greece’s and Ireland’s economies all had to be propped up with multi-billion euro rescue plans. Italy, Spain and France have also been a cause for concern.
Many fund managers have restricted themselves to only buying shares in Europe’s multinational corporations. Companies such as Nestlé, L’Oreal, or pharmaceuticals giant Novartis were deemed unshakable. The fact these companies only happen to be headquartered in the Eurozone, but make most of their earnings overseas, was bandied around with an annoying frequency.
All this began to change in the summer of 2012. The world’s media had long been speculating on the prospects of the Eurozone breaking up, and Mario Draghi, president of the European Central Bank, declared in a landmark speech that he would do “whatever it takes” to keep the single currency intact.
This vote of confidence breathed life into Europe’s equity markets and as you can see on the chart below, £1,000 invested in the MSCI Europe index in the summer of 2012 would now be worth £1,667.
If the Eurozone’s QE programme, which kicked off in March, mirrors the success of QE in other countries then this £1,000 could grow even larger still. Deciding which fund to buy for your portfolio will depend on whether you are attracted to income (see page 44 for more on the benefits), or prefer a more growth-focused fund.