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Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

Please be advised that future verbal and written communications from the bank may be in English only. These communications may include, but are not limited to, account agreements, statements and disclosures, changes in terms or fees; or any servicing of your account.

Por favor, tenga en cuenta que es posible que las comunicaciones futuras del banco, ya sean verbales o escritas, sean únicamente en inglés. Estas comunicaciones podrían incluir, entre otras, contratos de cuentas, estados de cuenta y divulgaciones, así como cambios en términos o cargos o cualquier tipo de servicio para su cuenta.

Informamos que as futuras comunicações do banco, verbais e escritas, podem estar disponíveis apenas em inglês. Essas comunicações podem incluir, entre outras, acordos de conta, extratos de conta e divulgações, alterações aos termos ou tarifas, ou qualquer tipo de serviço pertinente à sua conta.

仅此通知,本行即日起发出的口头及书面通信可能将只提供英文版本。这些通信可能包括但不限于账户协议,账单和通知,条款或费用变更;或任何为您账户提供的服务。

The streets of London with the gherkin in the background

Perspectives

Bullish Europe and UK equities, currencies, high yield bonds

Jeffrey Sacks

By Jeffrey Sacks

Head - EMEA Investment Strategy

January 15, 2021Posted InFixed Income, Investment Strategy and Equities

  • UK equities overweight, sterling well supported. The UK’s equities and currency have started the year well following the EU trade deal and vaccine progress. Admittedly, short-term healthcare and economic challenges are significant. However, cheap equity and currency valuations, as well as pent-up demand, create scope for both to appreciate. 

 

  • European equities overweight. Investor perceptions of Europe are in the early stages of positive change. Fiscal policymaking has been aggressive during the pandemic. The solidarity in evidence during the agreement and ratification of the EU Recovery Fund is supportive for the weaker Eurozone periphery countries. And the European Central Bank (ECB) continues to support the bloc’s economy and bond prices. Alternative energy is a powerful growth driver, supported by government initiatives. The Biden presidency should be a net positive factor for Europe. 

 

  • Both UK and European equities offer particularly good exposure to the areas we favor globally: “COVID cyclicals,” value, mid-caps, high dividend yielders and dividend growers. 

 

  • The Euro has further upside potential. While the rally over recent months is largely a result of US dollar weakness, further upside is likely to be domestically driven, as further vaccine progress gathers momentum. 

 

  • High yield corporate bonds offer selective opportunities, even after the 27% price rally from March 2020’s lows. In an environment of “financial repression,” the average yields of 3.2% look attractive versus cash and other areas of the fixed income universe – see Overcoming financial repression in Outlook 2021. 


The first part of this note considers in more detail the three broad reasons for our bullish outlook: 

Firstly, the five-year Brexit uncertainty is over. Further trade deals lie ahead for both the EU and the UK.

Secondly, the region’s economies are expected to recover in 2021, with growth momentum rising as vaccines are rolled out. Policy support is expected to outlast the pandemic.
Thirdly, valuations are attractive and ownership levels are low.

The second part of this note summarises eight specific areas of investment opportunity in more detail. Within equity, we examine “COVID cyclicals,” value, midcaps, dividend growers, and alternative energy.

Within fixed income, we consider high yield corporate bonds, and both the euro and sterling in currencies.

Read European Strategy