Now is the time to buy large caps

ON EUROPE

Newton's Tom Beevers believes a gulf has appeared in the market between the most and least expensive stocks.

Since March 2009, European equities have enjoyed an almost uninterrupted increase in investors' risk appetite. Policy rates across the world have been kept close to zero, while inflation has been subdued, creating a perfect environment for risk-taking. During this period of ‘benign reflation', the type of stock that has performed well demonstrated two characteristics. Firstly illiquidity - the sheer weight of cheap money has benefited small-cap stocks over large cap stocks. Secondly high gearing - cheap money has lowered the cost of capital for highly geared stocks. Policymakers ca...