Recovery begins after bleak midwinter for European equities

At the start of 2009, the outlook for European equities was bleak. Banks had ceased lending to each other, liquidity was absent from the market and credit had become the scarcest commodity of all.

Investors were exiting equity markets en masse as industrial production all but ceased and companies severely downgraded their earnings expectations. European markets in particular felt the pain as the markets’ significant weightings in ‘cyclicals’- including financial and industrial companies- caused declines in Europe to be more aggressive than in many other developed economies. In short, almost all indicators were pointing to a dismal future for European equities. Improving credit conditions set the stage for the imminent bull market. By March 2009, credit had returned to the marketpl...