Restoring confidence in eurozone top priority for investors

ON AA

The markets are being driven by newsflow, which gives us an uncertain outlook and probably high volatility for a long while to come.

For many people, valuations have gone completely “out the window” and seem unimportant in determining what market behaviour is. In our view equities can now be considered to be cheap but probably not for those who cannot endure an extremely volatile year ahead. In Europe, earnings expectations for next year have already been revised down by around 10% in the last few months and prospective price-to-earning ratios (P/E) got to very low at less than eight. Even allowing for substantial further downgrades in earnings, the earnings yields  able are still in double digit territory, which i...