As U.S. markets enter the later stages of an economic expansion, it’s more critical than ever to ensure investors are looking outside U.S. borders to international markets still in their earlier stages of economic recovery. With a bottom-up, flexible approach to pursuing their highest-conviction ideas across international markets, Shane Duffy and Tom Murray, portfolio managers for JPMorgan International Unconstrained Equity Fund (IUESX), share five key themes as they navigate today’s rapidly changing global landscape.
1. Finding value in Europe
Europe continues to look cheap – both historically and relative to the U.S. – with a forward P/E below its 25-year average. Earnings in Europe – which have not yet recovered from pre-crisis peaks – have started picking up as the macro backdrop turns more positive. In fact, the European economy has accelerated at its fastest pace since 2011.
While we see plenty of opportunities among Europe’s cheapest stocks, we look to invest in only our best ideas – and only where we see sound, improving fundamentals. In the financial sector, we are seeing stronger capital levels in European banks, increased visibility on regulation and more capital being returned to shareholders. As the European economy continues to improve, banks are lending again and loan growth has expanded, while a rising interest rate environment is positive for profitability.
We like ING, the largest bank in the Netherlands. Unlike many of its peers, ING has created a unique customer-centric model with robust profitability based on resilient margins, excellent asset quality and a solid digital banking platform. Its commitment to a progressive dividend policy makes it one of the most attractive capital return stories in the global banking space.
International Unconstrained Equity Fund
The Fund focuses on maximizing return potential by flexibly pursuing our best investment ideas across all regions and sectors of the international markets.