European companies should see a “return to meaningful corporate profit growth” in 2015 as the tailwinds of quantitative easing and a low oil price feed through, according to Argonaut’s Barry Norris.
Mr Norris, who runs a range of European equity funds for Argonaut, said economic lead indicators such as purchasing managers indices and banking lending figures, had bottomed in October 2014 and have been steadily increasing since.
He said: “With the caveat that there have already been several false dawns, this is a welcome development for European equity investors.”
Investors have flocked to European equities so far this year, attracted by the improving conditions in the single currency region, and the MSCI Europe index is up by 14 per cent year to date in sterling terms.
The inexorable rise has come in spite of the danger of Greece defaulting on its debt and possibly being forced to leave the eurozone.
Mr Norris acknowledged the Greece issue was the “fly in the ointment” for an otherwise positive outlook for Europe.
The manager said the confrontation between the Greek government and its creditors, including the European Central Bank (ECB) and the International Monetary Fund, was “likely to come to a head over the summer when €6.5bn (£4.7bn) of government bonds are scheduled to be repaid”.
But Mr Norris argued that it may actually be a better outcome for the eurozone in the long term if it ejects Greece, “even if this leads to a short-term market negative event of Greek debt default”.
The ECB’s quantitative easing plan could be extended to mitigate a Greek default, he suggests.
