Why the European economy favours smaller companies

More domestically-focused

Corporate profits were healthy across Europe in Q1 as growth strengthened in economies in the south, after an extended period of austerity, and the more robust economies of the northern European nations continued to expand.

In our view, this improving economic picture is likely to particularly favour smaller companies, which tend to be more focused on domestic markets. Interest rates remain very low, which is also supportive for European equity markets. Companies that wish to borrow to invest in their businesses can do so inexpensively, and investors contemplating low bank rates and bond yields are likely to continue to invest in equities. Europe and Brexit: Don't try to second guess the impact On a more cautious note, valuations of European companies are now towards the upper end of their historic ra...