Cyclical drivers still key to equity performance - in spite of Brexit

Triggered by the European Central Bank's (ECB) Asset Quality Review in November 2014, credit growth across Europe has continued to improve, albeit with ongoing support from the bank, writes PineBrdige's Hani Redha.

It is hard to overstate the powerful implications of this driver for profit margins, particularly since it coincides with low commodity prices, high consumer confidence, and a lack of cost pressures due to considerable slack in the economy. After averaging 1.31 for three years, the euro has averaged 1.11 versus the dollar since January 2015. This level is relatively competitive and along with the ECB's highly accommodative policy stance, the environment is supportive for the cyclical recovery to proceed. In terms of valuations, European equities are generally fully valued with limited...