‘Stage is set for rotation into European cyclicals'

Hansueli Jost is manager of the Julius Baer Euroland Value Stock fund. Following his address to delegates at Investment Week's Funds to Watch event in London earlier this month, he explains the current trend for improving corporate profitability in the eurozone, why Europe will not suffer Japan-style deflation, and why he is backing cyclical stocks to lead the market recovery.

Why do you believe a sustainable European recovery is around the corner? Over the past seven years, Europe had to digest two systemic crises, deleverage its banking and corporate system, and raise its structural profitability through relentless cost cutting initiatives. After three years of double-digit negative top-line growth and negative earnings growth, last July we finally saw negative top-line growth for most cyclical business models slow into single digits, triggering 10% to 12% earnings growth. This slow and steady cycle will continue, supported by FX headwinds turning int...