Wind turbines

European equities
tailwinds pick-up but still under-owned

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested

After initially lagging other regions, Europe’s activity restart picked up speed earlier this year. Eurozone economic data and confidence indicators have remained robust, and earnings-per-share (EPS) growth for the region has outpaced the US in the latest reporting season.

Source: JP Morgan, as of 12 November 2021.

Equity sources of total return - 2021 YTD

Graph showing equity sources of return - 2021 YTD

Total asset returns (%, net total return in local currency) 2016 2017 2018 2019 2020 YTD 2021
MSCI USA 9.9 21.2 -5.0 30.9 20.7 25.4
MSCI Europe ex-UK -0.6 11.1 -13.4 23.4 -0.4 21.7
MSCI Japan -0.7 19.7 -15.1 18.5 8.8 16.3
MSCI EM 7.3 27.8 -12.2 15.1 16.6 0.5
MSCI UK 18.6 11.7 -8.8 16.4 -13.2 16.5
MSCI ACWI 6.1 17.5 -9.5 23.7 12.3 19.2

The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results. Source: Refinitiv Datastream, MSCI and BlackRock Investment Institute, 19 November 2021. Notes: the bars show the breakdown of each market's 12-month return into dividends, earnings growth and multiple expansion. The dots show each market's total 12-month returns. Earnings growth is based on the 12-month change in 12-month forward I/B/E/S earnings estimates. World is defined as the MSCI All Country World Index. Returns are based on MSCI indexes. Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.

The case for European equities

Karim Chedid, Head of EMEA EII Investment Strategy is joined by Stefan Gries, Managing Director and Portfolio Manager in BlackRock's Fundamental European Equity team, as they discuss why BlackRock is currently overweight European equities in this Around the World (ATW) special.

A broadening restart in Europe, supported by ample monetary and fiscal support, should help to sustain the restart and provide a tailwind for European equities.


  • The European Central Bank (ECB) has suggested that rates are likely to remain at or below current levels until inflation can persistently and durably reach the central bank’s new 2% symmetric target for the medium term.
  • We also expect the ECB to introduce further easing measures in 2022 as pandemic emergency purchases end, with support likely to be extended until the central bank achieves its symmetric target on a sustained basis.
  • Fiscal spending has also ramped up, with the EU Recovery Fund beginning to distribute its €750B of loans and grants to help drive growth and investment.


Source: BlackRock Investment Institute, August 2021. Data as of 30 June 2021.


Investor sentiment is improving, but positioning does not look stretched.

With $17.6B added to European equity ETPs globally since the start of May, total year-to-date inflows now stand at $26.8B – nearly 4x last year’s total ($7.2B)1.

Beneath the surface, the shift to sustainability has been a key theme, as investors replace their core portfolio holdings with sustainable equivalents. This is particularly evident among EMEA investors, with over 70% of inflows into EMEA-listed European equity ETPs this year going into sustainable products2.

However, cumulative inflows have only just recovered to highs last seen in 2018, and after many years of muted buying, Europe remains under-owned, in our view.

1,2: All flows figures sourced from BlackRock and Markit, as of 31 October 2021. All flows are global and in USD unless stated otherwise.

Despite the recent rerating, European equity valuations – as measured by the equity risk premium –remain attractive and cheaper than their historic average.

We believe the activity restart and Europe’s high sensitivity to global growth could position European equities as an attractive investment in the current environment, and we also see opportunities over the long term driven by the fast pace at which our economies are digitalising, decarbonisation of transport & the shift to electric vehicles, as well as the shift to more renewable fuels and ambitious targets to modernise our existing building stock.

Sources: BlackRock Investment Institute, August 2021.

Graph showing Eurozone equity risk premium

Source: Refinitiv Datastream, MSCI, Federal Statistical Office, Germany, as of 31 August 2021. Notes: the equity risk premium is calculated by deducting the German 10-year real bund yield from MSCI Eurozone earnings yield 

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Balls of string

A blended approach to European equities

Key points


Europe is home to world-leading companies in areas like technology, engineering, healthcare, and consumer goods - creating long-term opportunities for selective investors


We see the current macro environment and structural trends benefitting broad European equity exposures, particularly those of a sustainable nature.


We see opportunities for both index and alpha-seeking exposures, and believe a blended approach could be an attractive way to access the asset class.

Equity risk
The value of equities and equity-related securities can be affected by daily stock market movements. Other influential factors include political, economic news, company earnings and significant corporate events.

See how BlackRock products could help you access European equities

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Meet your partner

BlackRock Portfolio Analysis and Solutions (BPAS) can empower you to gain new perspectives on your equity portfolio across active and indexing.

Leading European investment platform

We have been entrusted to manage €1.9tn on behalf of European clients1, making us one of the leading investment managers in the region. We will continue to invest in research, products, portfolio implementation solutions, and services across the region. And perhaps most critically, we will use our technology, know-how, talent and more than 30 years’ worth of investment expertise to build better portfolios.

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

We offer a full range of investment products across multiple investment classes, capitalisations, sectors, and styles, including alpha and index options.

Source: BlackRock, June 2021

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