Goldman strategist says wait for entry point into European equities

Things were likely to get worse before they got better in the equity space, but if they did, that might throw up some opportunities for investors, particularly in Europe, a strategist from Goldman Sachs told Bloomberg.

A China-led rout among equities might get worse but that would be exactly the time when investors should be eyeing up opportunities to pick up some shares,Christian Mueller-Glissmann told the newswire in an interview from London last week.

Mueller-Glissmann, a managing director for portfolio strategy, had been 'neutral' on stocks since August.

The strategist said he preferred European stocks, because they were cheaper relative to those Stateside and had better prospects for earnings.

Counting from the close of trading on 11 January, his forecast called for an 18% gain in the Stoxx 600 over the following 12 months.

That was twice the upside move estimated for the S&P 500.

He projected that earnings at Stoxx 600 companies would rise by 8%, versus the 5.7% projected by his peers on average. In 2017 profit growth would accelerate slightly and gain 10%, he added.

Significantly, last week's losses had not changed his outlook.

What were the best sectors to move into? Financials, staples and health-care as well as those most linked to Europe's economic recovery.

Mueller-Glissmann was not a bear on US equities, and he recommended clients stick to their allocation in the region, although they were nearing the end of a long bull market.

“We don’t anticipate a U.S. recession or a global recession, and that’s required to put the U.S. into a more prolonged bear market,” he said.

“At some point, valuation will get support.”