60 seconds with James Sym: Can a recovery in European earnings power further stock gains?

James Sym

James Sym

Fund Manager, European Equities

See all articles

A time to pause after a strong performance from European equities

European equities have had a great run over the last three years, ever since the European Central bank President Mario Draghi said he would do “whatever it takes” to save the euro and help maintain the union, so now we need to take stock.

A reappraisal of valuations

Equities are no longer so cheap in Europe.

They started off cheap as we came out of the credit crisis, but European stocks have now re-rated to a more normal level of valuation, or perhaps even above historic levels of valuation based on companies’ profits.

Earnings upgrades on the horizon

The good news is we are about to start getting earnings upgrades.

That means that companies are going to start making more profit over the next two-to-three years than they have done in the previous few years, which is very powerful because for five years we have seen earnings downgrades in Europe.

Rewards on offer for patient investors

A big shift is needed in peoples’ portfolios. There are a lot of investors who have an underweight exposure to Europe and I think that could change quite significantly.

After a very strong start to 2015 I would say we have had most of the returns for the year, but if you are prepared to take a two or three year view I would say remain constructive.

Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change.  To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.