MAB Quarterly Review Q1 2025 - Adventurous - Flipbook - Page 7
While we remain overweight the UK equity market and think it could prove to be an attractive source of
diversi昀椀ed returns in coming years, we also feel spoilt for choice in opportunities across the globe.
Europe Ex-UK equities
Continental European equities appeared to enter a renaissance in the 昀椀rst quarter of 2025, reinforcing our
belief that while we have tactically tilted away from the market recenty, it continues to make sense to hold a
health allocation to opportunities here. The MSCI Europe Ex-UK equity index returned +7.6% in Q1 in Pound
Sterling terms. The rally was reasonably broad-based across the market, however sectors such as Financials
and Defence stocks were particular outperformers.
The catalyst for these strong returns appeared to be a newfound willingness for the new German administration
to loosen the government purse-strings in order to increase spending on defence. This was in light of the new
American administration’s wavering commitments to European defence in the face of a belligerent Russia. In
January we moved further underweight the asset class in order to move further overweight Japanese equities.
Looking forward, we think that while it makes sense to retain a healthy allocation to the European equity
market, we remain comfortable with our underweight in spite of the strong price action seen in the 昀椀rst
quarter. There has been a distinct lack of improvement in European company pro昀椀ts thus far, notwithstanding
the increased spending commitments. This has left the market trading on valuations which are high relative
to its own history and less attractive relative to markets such as Japan and the UK. The European continent
continues to face challenges such as sluggish economic growth, which is now being compounded by the
escalating tariff war.
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