Jewell believes that quality is key to Europe’s performance in the second half and beyond. She sees opportunities for active managers to find quality companies across high-quality sectors.

“The luxury, healthcare and semiconductor sectors contain some of Europe’s highest quality companies; they are highly profitable, well run and have a global customer base,” she said in a note. “Luxury and healthcare have lagged, and Europe’s performance in the second half of the year may well depend on whether they can catch up. Some companies were trailing and have now started to bounce back, showing how quickly these quality areas can recover after a period of underperformance as fundamental strength shines through.”

Jewell believes that there are luxury stocks that are well placed to deliver market-beating earnings growth. She prefers some of the high-end brands with strong pricing power to help offset the impact of tariffs. Ferrari, for example, said it would increase prices by 10 per cent on some models to offset the impact of tariffs. On the other hand, there are some brands that say they front-loaded price rises during Covid and may struggle to raise again soon.

On healthcare, Jewell is cautious overall: “Tariffs could be a potential drag on earnings, and US government policy remains uncertain. Yet the sector is ripe for stock picking. Pharmaceutical companies make up a large part of the benchmark.” 

Jewell remains positive on the semiconductor industry, even as it has faced a range of issues, from geopolitical tensions to company-specific problems. The large tech companies in the US have confirmed their commitment to vast AI capital expenditures, which is a boost for some of Europe’s semiconductor companies. Likewise, increased capex among the chip makers underpins the producers of the machines needed to make them. She also likes some of the companies that provide software for the semiconductor industry.

Jewell believes that quality is key to Europe’s performance in the second half and beyond. And she sees opportunities for active managers to find quality companies across sectors.

Jewell also highlighted the benefits of European Banks. Even with European Central Bank (ECB) rate cuts, European banks have sustained strong profitability. With rates stabilising around 2 per cent, she continues to favour banks capable of returning capital to shareholders through dividends and buybacks. These institutions remain well-positioned to deliver in a lower-rate environment.

European defence spending also continues to rise, with a strong emphasis on local procurement. “This supports both traditional defence firms and aerospace suppliers with pricing power due to supply chain constraints and surging demand post-Covid,” she said.

Other wealth managers
Other wealth managers are also positive on European over US equities. As the US becomes less predictable, Ronald Temple, chief market strategist at New York-headquartered also believe that European equities still offer more opportunities. “There are basically three aspects arguing in favour of European stocks: first; the aspect of diversification, second, cheaper valuations, and third, the higher share of cyclical corporations in Europe,” Vincenzo Vedda, global chief investment officer at DWS, said in a note. See more commentary here and here.