Head - EMEA Investment Strategy
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When assessing potential buying opportunities in today’s environment, long-term investors should look at firms’ financial resilience.
The response to the COVID-19 pandemic is already causing a widespread cash flow crisis for many European companies. Next, there will be significant downgrades to earnings forecasts. Some of the downgrades and equity price falls will be overdone and will create trading opportunities. At this stage, we cannot have high conviction in the sustainability of the upcoming trading rallies. For us to do so, we need to see a peak in the growth rate of fresh COVID-19 infections and deaths. We also need more clarity into the full scale and duration of governments’ support measures. The government-mandated lockdowns are starting to have a dramatic negative impact on European economies. If these are sustained, the economic downturns could be deeper but shorter.
Read European Strategy here.