European equities: Is it already time to take profits?

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Given the growing popularity of European equities, Nicolas Chaput, CEO & co-CIO and Laurent Denize, CIO, Oddo AM discuss whether it is worth staying invested.

ECONOMIC GROWTH FORECASTS HAVE BEEN REVISED UPWARD
Euro zone leading indicators continue to improve, driven by a combination of lower oil prices, lower bond yields, and a weaker euro, and a steady improvement in credit conditions as banks begin lending again in response to stronger demand. In light of all this, growth forecasts could very well be revised to as high as 1.5%.

INVESTMENT INFLOWS CONTINUE TO DRIVE THE MARKETS
International money has flowed massively into European equities in recent months and should continue to do so, given that, on average, investors are still underweighted in European stocks. This steady inflow is providing true support for European equity performance

ECB MONETARY POLICY STILL A SOLID SOURCE OF SUPPORT FOR RISKY ASSETS
On Monday 9 March the ECB started up its sovereign bond purchase programme at a time when about one third of sovereign debt is currently trading at negative yields. So will investors keep pouring money into negative-yielding “risk-free” assets? A phenomenon of eviction should help higher-yielding assets (long-dated sovereigns, high yield bonds and high income equities), as well as cyclical stocks that are heavily exposed to interest rates (e.g., property companies and banks).

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