BlackRock Fund Manager Says European Stocks Are Attractive

BlackRock’s Thomas Becker says euro-zone stocks look attractive after the recent pullback, citing the potential for policymakers to use the energy crisis to unlock long-delayed fiscal investment. The article notes European equities have underperformed global markets since the start of the Iran war, highlighting a relative-value setup rather than a direct earnings or policy shock.

Analysis

The setup is less about near-term earnings recovery and more about policy optionality: if fiscal spending follows the energy shock, the best relative winners are not the obvious domestic cyclicals but the capital goods, grid, defense, and industrial electrification names that convert government capex into multi-year backlog. That argues for a second-order rotation within Europe rather than a blanket beta bid; quality exporters with global revenue and pricing power should outperform pure domestic consumer names if the macro mix stays stagflationary.

The market may be underpricing how persistent positioning damage has become. If Europe has de-rated on growth fears and energy anxiety, a modest policy response can trigger a sharp squeeze because investors are already underweight, but the rebound is likely to be index-level first and fundamental later. That creates a favorable setup for a tactical long in European equities versus regions where consensus is already crowded, but only if energy stays contained enough for the fiscal impulse to matter.

Main risk is that the energy shock keeps tightening real incomes faster than governments can offset it, which would leave the region trapped between slower growth and higher subsidies. In that case, the beneficiaries shift toward LNG, utilities with hedges, and defense, while banks and consumer discretionary lag on credit and demand pressure. Time horizon matters: a multi-week bounce can happen on policy headlines, but a durable rerating likely needs visible budget commitments over the next 3-6 months.

Key Decisions for Investors

• Go long EWU vs. short EEM for a 1-3 month tactical relative-value trade; thesis is Europe gets a policy-driven sentiment squeeze while EM lacks the same fiscal catalyst. Risk/reward is attractive if European policy headlines improve, but cut if energy prices re-accelerate and real incomes deteriorate.
• Overweight XAR/LMT-style defense exposure in Europe via local defense primes or defense-heavy ETFs for a 3-6 month horizon; this is the cleanest beneficiary of fiscal re-prioritization. Use dips after macro selloffs to build, since the catalyst is budgetary and tends to arrive in bursts.
• Long EU capital goods / grid-electrification names versus short European consumer discretionary; fiscal spending and energy-security capex should flow into equipment, transmission, and infrastructure faster than household spending recovers. Hold 2-4 months and reassess if wage support meaningfully offsets consumer strain.
• Consider a long European banks basket only as a barbell against a long duration short, not outright; banks benefit if fiscal support stabilizes growth, but they remain vulnerable if energy keeps pressuring credit quality. The trade works best on a policy surprise, not as a secular thesis.
• For BLK, treat this as a modestly positive flow setup rather than an earnings catalyst; use any broad Europe rally to add exposure to its active and ETF franchise. Near-term upside is sentiment-driven, but the durability depends on whether Europe’s underownership turns into sustained inflows.