Head - EMEA Investment Strategy
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More aggressive action from policymakers is driving an improvement in Europe’s investment outlook.
The investment outlook for Europe is improving, driven by four factors:
Firstly, domestic policymaking is now tackling the pandemic in a more aggressive and targeted manner, particularly in the European locomotives Germany and France. The cost of the increasing domestic fiscal accommodation is being supported by the ECB with continued low rates and its expanded asset purchase program, keeping bond yields low.
Secondly, the potential European breakup risks driven by the periphery are receding, driven by two factors:
Thirdly, Covid-19 is under better control. There are many tough months ahead before a vaccine, with regional surges likely, nevertheless we are not expecting another period of prolonged blanket lockdowns.
Finally, the economic data is improving from the second quarter lows. While the pace of the pickup is likely to ease, and while we do not expect output levels to reach end-2019 levels for at least two years, the trend of gradual improvement seems well underpinned. Our GDP forecast for 2021 has doubled to +3%.
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