Another investment group advised investors to stick with equities this month. 'Equities will pr...
Another investment group advised investors to stick with equities this month. 'Equities will produce better returns than bonds and cash over the next 12 months' maintained Henderson Global Investors. The group conceded though that returns will be less than in past recovery phases.
Henderson explained the recent rally in bond markets and the sell-off in equity markets has left equities looking cheap. Although valuations are not yet at the extremes reached in 1998, the group concludes that equities are good value and bonds are relatively poor value. Before this value can be realised though, Henderson says there will have to be a shift in sentiment about the global economic outlook.
Looking ahead, the group thinks earnings decline will bottom in the second half of this year before recovering in 2002, in line with output growth. But because the recovery in 2002 is likely to disappoint, it expects earnings estimates to be revised down in the short term.
The group reckons there is little to choose between the major equity markets, reflecting the absence of any big valuation anomalies. Spain was highlighted as remaining to be the best performing market in Europe so far this year with its best sectors being construction, banks and petrochemicals.
Henderson noted Citigroup, Duke Energy, Axa, Totsl, RBS and Dixons as stocks, which look to offer growth at a reasonable rate.
With regards to the ill performing technology sector, Henderson warned if the present rate of decline continues in Europe, which is heavily influenced by the telecom equipment manufacturers, we could be headed for zero earnings.
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