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Editing: Sally Ismail
Mubasher: Black Rock has urged investors to advise "overweight" European badets in portfolios after repeatedly confirming a vision of "weight loss".
"The reason behind the decision to update their vision of European badets, from equities to government bonds, is that the company is the largest badet management company in the world," he said. said Mike Bale.
The main reason for this change lies in the hope that the ECB will take a cautious approach over the next few months, as the prospects for economic growth and the sustained decline in inflation remain below the target. from just under 2%.
Indeed, financial conditions in the euro area have improved, as indicated by the Blackstone Financial (CFI) index.
The ECB is expected to announce further stimulus in the coming months to raise the low inflation rate.
These incentives should help to ease financial conditions and support European badets, as the outlook for these ECB actions is not fully priced in the markets.
The world's largest badet management company believes that the European Central Bank could set the tone at this week's monetary policy meeting and take action later in the year.
The shares could include further interest rate cuts on negative deposits (-0.4%) and a new round of purchase of financial badets, including corporate bonds.
Another reason is the positive economic outlook so far, although forecasts of economic growth have been mostly weak in the United States and China recently, but have stabilized in the euro area even at lower levels. .
BlackRock has recently reduced expectations of global economic growth because of trade and geopolitical tensions, which contribute to fueling global uncertainty.
The International Monetary Fund (IMF) yesterday lowered its global economic growth forecast for the fourth time this year, but maintained its estimates of euro area GDP growth at 1.3%.
A cautious change in central banks would create an appropriate environment for risky badets in the short term.
At the same time, China's economic growth seems to be stabilizing as policymakers are ready to implement additional fiscal stimulus, easing concerns about an obstacle for the European economy.
Blackrock recommends "overweighting" European government bonds in portfolios and ending the "weight reduction" recommendation for European equities and bonds.
Blackrock favors high-yield bonds (junk) because of declining emissions, large flows and a difference in risk premium relative to their US counterparts.
It also focuses on quality factors, high profitability sectors, earnings stability and low debt, such as the pharmaceutical sector, but does not favor the consumer sector because of its exposure to trade conflicts, while avoiding banks with negative interest rates.
Blackstock Global Portfolio Manager Ross Costrich notes that while US stocks have seen strong growth this year (the S & P 500 index has risen 20%), it is outperforming the rest of the world, but the question of portfolio diversification Stay well.
Surprisingly, since the beginning of the year, some Chinese stock indexes have risen by more than 20% and European equities are another positive territory, up 15.5%.
For investors investing in international equities, Europe deserves another look. While Europe is facing challenges, European equities have some support, to some extent.
These positive factors are attractive valuations, high dividend yields, the global reach of Europe's largest companies, and the relative prudence of the ECB.
European equities trade 13 to 14 times next year's earnings, and are 18 times cheaper than the S & P 500.
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