Page 12 - ISQ July 2021

INVESTMENT STRATEGY QUARTERLY

Second Half 2021 U.K./European Equity Outlook:

Chris Bailey, European Strategist, Raymond James

“ Basically, the first half of life is writing the text, and the

”
second half is writing the commentary on that - Richard Rohr

Equity markets in both the U.K. and Europe have not only thoughts have fully factored in next year and even fewer early
achieved notable gains during the first half of 2021, but have thought about 2023. Equity markets typically appraise pros-
also performed much more strongly than expectations. Whilst pects for the next six to eighteen months. So whilst corporate
the perceptions towards COVID-19 vaccine growth potential earnings growth hopes for the rest of 2021 are likely to continue
were already rapidly improving by the first few months of the to improve, comparisons for the average company as 2022 pro-
year, full year 2021 earnings growth expectations were antici- gresses will become more difficult. Whilst prospective equity
pated to be around thirty percent compared to last year. By the market multiple valuations are far from being historically exces-
end of June, anticipated full year earnings growth for the equity sive, prospects for next year and beyond have more questions.
markets in the U.K. and Europe was expected to rise over sixty Inevitably even for equity market investors this starts with local
percent. economic growth rates and central bank policy.

So where do we go from here? Whilst anticipated economic Equity markets do not exist in isolation, but are at the mercy of
growth rates in the U.K. and Europe for full-year 2021 and 2022 global demand and supply. Heightened demand from global
are high, the question is more, “what has not already been fac- investors for shares in the U.K. and European markets has been
tored into future equity market expectations?” Three key factors notable over recent months. Whilst such raised demand appears
are of particular interest. to have factored in high levels of optimism, the reality is a little
trickier given the high levels of pessimism over recent years
The first relates to hopes beyond the next six months. All finan- from many global investors towards the U.K. and European mar-
cial markets always look forward, however only some of those

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