60 seconds with Rory Bateman on equity drivers in 2017
The three key features for European equities in 2017 are corporate earnings, valuations and market rotation.
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.
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.
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.
The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.