Technological innovation

Accelerated technological change is another inescapable truth identified by our economics team. Schroders fund manager Leon Howard-Spink highlights that Europe has long been home to innovative and sustainable companies with strong growth prospects in the field of technology.

He says, “Europe offers a deep pool of companies exposed to, and often leading the way in, technological innovation. There are very few industries and businesses out there that are not impacted by digitisation, communication, electrification, the gathering and processing of data, and the increasing development of software and algorithms.

“These advances must be harnessed by all companies to one degree or another to drive productivity and product relevance. As investors looking for growing businesses, we are by necessity driven towards the companies that are benefiting from these trends.”

What could be the impact on profits and valuations?

The changing sector mix in European equities offers fresh hope that the continent could see better earnings momentum. This is because faster-growing healthcare, technology and consumer-based sectors now make up some of the largest MSCI Europe index constituents.

Schroders fund manager Martin Skanberg says ”There is a lot of uncertainty globally at present but I’m bullish that European exposures will continue to shift towards sectors which have sustainable growth prospects above and beyond what we anticipate to be tepid GDP growth globally.

“We’re not naïve about the regular flow of challenges that the region faces. These challenges are reflected in lower valuations relative to other regions. However, the changing shift in Europe, from old economy exposure to structurally growing industries, could lead to a higher, less volatile earnings growth rate. In turn, this could bring a higher valuation, although this will take time.”

What are the risks associated with investing?

All investing comes with risk, its important to understand your investment goals and objectives as well as your risk appetite. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Reliance should not be placed on any views or information in the material when taking individual investment and/or strategic decisions.

Important information

Any references to companies is for illustrative purposes only and not a recommendation to buy and/or sell.

The article is not intended to provide, and should not be relied on for investment advice.

Information and opinions contained herein are subject to change.

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