Valuations of developed equities at enticing levels

ON EUROPE

After a difficult start to 2009, March marked an inflection point for European equity markets.

From this low point in terms of sentiment, the market started a strong recovery fuelled by less-negative leading indicators and by signs the trough in the economic cycle had passed. While we expect positive returns for European equity markets throughout the year, there are still uncertainties that will provoke short term corrections. A clear source of instability for European markets is the weak situation of many government accounts. High current account and fiscal deficits will require rising government indebtedness and increased tax pressure on the consumer. In the medium term, this...