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Investment strategy
April 19, 2021
2 mins

UK and European equities continue to look attractive

April 19, 2021
2 mins
Jeffrey Sacks
HEAD - EMEA INVESTMENT STRATEGY
SUMMARY

With vaccine rollout progress and economic recovery continuing, we see reasons to accumulate both UK and European equities.


Overweight UK equities: UK equities are cheap in absolute and relative terms and offer attractive dividend yields. The rapid vaccine rollout along with ongoing fiscal and monetary policy support should lead to a strong GDP growth rebound this year. In turn, average EPS growth may approach 40%. Early logistical and administrative challenges from leaving the EU are no worse than expected. We believe that early challenges in implementing the Northern Ireland protocol will be overcome.

Overweight European equities: The patchy vaccine rollout is starting to improve in the present quarter. European Central Bank (ECB) policy remains very supportive, while the EU Recovery Fund implementation is likely to gather momentum over the summer. The Biden presidency should be a net positive factor for Europe. Alternative energy is a powerful long-term growth driver, supported by increasingly ambitious government initiatives. Italy’s new PM Draghi -the former ECB chairman – is positive for Italy and more broadly for all the periphery countries and for European solidarity.

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

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