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.