ROI-Finding global equity value in unexpected places: Helen Jewell

By Helen Jewell

LONDON, Feb 17 (Reuters) - While 2026 has got off to a rocky start geopolitically, many global equity investors are still struggling to find bargains. But there are some potential pockets of value left for those willing to hunt outside U.S. borders. They're just not where you might expect.

At this time last year, European and emerging market equities were trading below their historical valuation ranges, but after 12 months of strong gains, those broad discounts have largely disappeared, and most major indices now look fully priced.

In an environment with lofty valuations and heightened geopolitical tensions, the risk of price pullbacks this year is high, increasing investor appetite for value with a reasonable growth outlook.

Here’s a global tour of where equity investors may potentially find just that.

EUROPE

First to Europe, where defence stocks were a major winner in 2025, with the sector’s index rising nearly 140%, as NATO members pledged higher military spending amid the ongoing war between Russia and Ukraine. Despite the sector’s strong multi-year returns, good value may still be found here.

European defence valuations may appear high with a price-to-earnings ratio around 30, but when adjusted for the expected strength of earnings growth, using the so-called “PEG ratio,” they no longer look excessive. At around 1.5, this metric is slightly lower than the level in 2017, before the start of the full-scale invasion of Ukraine, and also well below the average for U.S. peers, whose valuations sit near long‑term highs.

Elsewhere in Europe, many banks still look attractively priced - even after the European banking index gained nearly 300% over the past five years. Valuations on a price-to-earnings basis are still below the long-term average and lower than those of U.S. and Japanese peers.

One should note that European banks are now a “crowded position,” meaning many global investors are overweight the sector. It might not take much – perhaps just the indication that the European Central Bank could cut interest rates again – for many investors to cash in and exit the position. But given current valuations, shareholder returns and potential AI-boosted cost efficiencies, attractive opportunities appear to remain.

BRITAIN

Over in the UK, the FTSE 100 hit a record high at the start of 2026, having outperformed the U.S. in 2025 by more than five percentage points. Yet Britain's large-cap index still trades at a roughly 40% discount to the U.S.

That's largely because the FTSE 100 is dominated by banks and mining companies, not the big-tech or pure artificial-intelligence plays that dominate U.S. indices.

UK banks, like their European peers, trade meaningfully below their U.S. counterparts. And Britain's miners stand to benefit from high precious metals prices – even after the recent ructions – and from long-term demand for copper, driven by electrification and the energy transition.

However, if mining companies fail to maintain strict capital discipline or don’t pass on profits to shareholders through dividends, the sector could experience market jitters.

As one moves down in market-cap, opportunities for finding value appear to grow. On both absolute and relative measures, UK small-cap valuations are the cheapest they've been for the majority of the past two decades. Only Mexican stocks trade at a bigger discount versus their own historical valuations, according to Goldman Sachs.

Re-rating requires a catalyst, of course. But interest rate cuts by the Bank of England could be just the thing to get these UK stocks moving again. The market expects the BoE to cut rates twice in 2026, but the sector could rally if signs emerge that more easing may be coming.

EMERGING MARKETS

Latin America is out of favour with investors, but that's precisely why it might be a good place to go bargain-hunting. The region accounts for 7% of global GDP, according to the International Monetary Fund, but represents just 0.7% of the MSCI All Country World Index.

One country that stands out is Brazil. While valuations for EM equities overall are currently around 17% above the 20-year average, Brazil's market is trading at a 10% discount - and there are reasons for optimism moving forward.

Brazil's economy is looking healthy, with the composite PMI rising steadily for the past four months. And the country’s key interest rate of 15% - the highest in 20 years – is forecast to come down by as much as 300 basis points in 2026. This will likely benefit highly leveraged domestic companies in the retail and finance sectors – areas that are deeply unloved by global investors.

This source of EM value may act as a nice counterweight to the tech-heavy part of the benchmark, including countries like South Korea and Taiwan.

One risk, however, is that investor sentiment towards Latin America could stay stubbornly depressed, reinforced by the potential for political volatility – a factor EM investors must always consider.

If the first month of the year is any indication, 2026 is going to be eventful, with the United States often at the centre of the action. Investors may therefore be keen to increase regional diversification to be better positioned to withstand whatever additional geopolitical and market gyrations this year has in store.

(The opinions expressed here are those of Helen Jewell, International CIO, Fundamental Equities, at BlackRock. This column is for educational purposes only and should not be construed as investment advice.)

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