Niall Gallagher, investment director – European equities
The outlook for European equities is good from here. There are a number of areas that we believe will benefit, the first of which could be broadly referred to as the 'recovery sectors', such as construction and building materials, automotive, industrials and consumer.
We anticipate a recovery in spending that can boost the earnings of those businesses.
Those companies will have experienced a significant drop in their revenues and profits between March and May, but dependent on the scope of any further lockdowns, they should experience a strong rise in pent-up demand followed by a sustained recovery into this year and next.
In terms of earnings, we would hope for some of these companies that 2021 will not be much lower than was originally forecast.
We remain more cautious on travel, although leisure is having the chance to rebound somewhat over the summer.
We have also seen a greater switch from cash into card and online payments. We believe the area of digitalisation and the need for companies to operate remotely will continue to expand, which will benefit many software and hardware IT companies.
Finally, the 'greening' of the economy, a core aim of Europe’s policy response, should continue to benefit the drive to make buildings more thermally efficient and the electrification of cars.
These segments will see structural accelerations as a result of continued government fiscal support.