LONDON, May 25 (Reuters) - Asset manager Columbia Threadneedle’s multi-asset team upgraded equities to “overweight,” citing clearing political clouds and a sharp improvement in corporate profits, particularly in Europe, for their optimism.
Political risk in Europe has weighed heavily on the continent’s equity markets over the past year, though the failure of populist parties to win elections in the Netherlands and France stalled months of outflows.
The case for Europe has also been strengthened by a supportive economic backdrop and a robust first-quarter earnings season which saw earnings growth of around 19 percent, according to Thomson Reuters I/B/E/S data, with strong beats on the topline.
“With electoral risks diminished, the sea-change in corporate fundamentals now has the scope to be appreciated,” Columbia Threadneedle fund managers Toby Nangle and Maya Bhandari said in a note to clients.
“There also appears to be a lot of pent-up demand for European equities following years of outflows, particularly from Asian and US investors who have disliked the region since the Greek crisis,” they added.
On a broader scale Columbia Threadneedle, which has $467 billion of assets under management, also cited positive economic signals from China, the U.S. Federal Reserve beginning to tighten policy and President Donald Trump’s struggle to enact his protectionist agenda as supportive for equities.
In other asset classes, the cut their view on the US dollar to neutral. (Reporting by Vikram Subhedar and Kit Rees; Editing by Toby Chopra)