Threadneedle European equities manager Dan Ison said economies such as Spain and Ireland performed much worse during the global financial crisis, with investment returns generally tallying this trend.
However, over the past 24 months, those peripheral economies that have enacted dramatic reforms have started delivering better equity market performance compared to their “core” counterparts such as Germany and France, he said.
“The poster children of the eurozone reforms are certainly Spain and Ireland,” Mr Ison said, adding that both economies have exited their troika programmes.
“Spain can easily finance itself in open markets, and Ireland has recently conducted its first bond sale since the bailout,” he said.
“Unit labour costs, a good proxy for competitiveness, have fallen significantly from their peaks in both countries. Perhaps more importantly, their employment is now growing. Irish GDP saw a clear rebound, with particular strength in building.”
Last year saw a Phoenix-like resurgence in interest in European equities, with an intriguing mix of winners and losers.
“The equity markets of Greece, Finland and Ireland performed best, while the UK, France and Italy performed worst. Germany, The Netherlands and Spain were somewhere in between,” Mr Ison said.
“What can we glean from this? Generally speaking, those economies that have enacted the most dramatic economic reforms have delivered better equity market performance. Despite significant external pessimism about Europe’s ability for self-help, it has begun to work.”
