According to Goldman Sachs strategists, there’s a notable increase in European equity inflows – a marked shift in market movement after two years of consistent selling resulting from Russia’s still-ongoing invasion of Ukraine.
This trend of positive inflows into Europe aligns with a potential economic turning point for the territory, and follows a similar rally across the pond in the United States.
Long-only flows have avoided the European market in recent years. The net inflows nearly bottomed out in 2020.
Despite the positive developments, Goldman believes the region still has room for increased flows.
Aside from domestic investors re-entering the market, international investors are starting to pay more attention to Europe. However, the Wall Street firm notes that balanced and multi-asset funds aren’t returning. These were the major buyers for more than a decade from 2011 to 2022 because of their low interest rates.
As the expected rate cuts occur, Goldman’s team believes that European households will consider investing in equities again after favouring cash savings, deposits, and bonds, in recent years.
Goldman Sachs is also encouraging the government to come up and enact more policies encouraging Europeans to start using more of their savings to invest in equities to help stimulate growth in these struggling areas.