The company’s 2014 European Strategy Outlook forecasts an increase in investment spending next year – reflecting the rebound in capacity utilisation that has already taken place in many European countries, in combination with improved financing costs and rising corporate profitability.
“We forecast 14% [earnings per share] growth for the [STOXX Europe 600 Index] in both 2014 and 2015,” wrote S&P Capital IQ chief European equity strategist Robert Quinn.
“We expect cyclicals’ earnings to outstrip defensive peers by at least 15 [percentage points] over the next 12 months, allowing the current slight overvaluation to be quickly reversed.
“Overall we expect the greatest investment opportunities to be in the peripheral equity markets, based on the most spread compression and delta in earnings recovery.”
Regarding sectors, S&P Capital IQ Equity Research favours developed market, value strategies, and is bullish on autos and parts, as well as construction materials. Expectations for dollar strength are reflected in the company’s overweight views for healthcare and media stocks.
As Expert Investor Europe reported last week, State Street also forecasts strong performance from peripheral European equities in 2014.
