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60 seconds with Rory Bateman on equity drivers in 2017

Rory Bateman highlights three key themes likely to drive European equity performance in the year ahead.

5 January 2017

Rory Bateman

Rory Bateman

Head of UK & European Equities

The three key features for European equities in 2017 are corporate earnings, valuations and market rotation.

Earnings

Corporate earnings are set to grow in 2017 at the fastest rate of the last five years. The earnings outlook is much improved; we’re already seeing better earnings revisions from a number of sectors in the market as inflation expectations pick up, which is typically a good thing for the earnings recovery story.

Valuations

In terms of valuations - they look attractive relative to history but also to other developed markets around the world. If we think about the re-rating opportunity of the market plus the corporate earnings growth story, things look quite reasonable for equities next year.

Rotation

With regards to the market rotation within the market – we’ve seen a significant outperformance of growth stocks versus value, but that’s changing. Value has started to outperform and bond yields have picked up.

So, it’s generally a pretty positive outlook for Europe. We feel that there’s going to be a number of political uncertain events and obviously we would advise clients to take advantage of the uncertainty and market volatility in order to benefit from the themes that we have highlighted.

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