Monetary policy

Headlines in Europe are again focused on weak economic growth but there remain many companies well placed to deliver. Analysis of Nick Sheridan, Fund manager Henderson Horizon Euroland.

According to Keith Wade, Chief Economist at Schroders, equity markets have experienced a setback recently and this has led many strategists to question the longer term case for the asset class. However, he remains positive on shares and believes that equities can still generate an attractive premium for investors.

According to Goldman Sachs, the SNB’s exchange rate ceiling against the Euro is often seen as a binding constraint on its future interest rate decisions. But the exchange rate commitment is only likely to become a constraint on rate decisions if the CHF remains close to the 1.20 level against the Euro....

This year however, it is not credit fundamentals that matter. It is all about central bank policy. As a rising tide lifts all boats, central bank liquidity injections are supporting all financial assets, from risk-free Treasuries to stocks.

There has been a substantial increase in volatility over recent weeks caused by a number of different factors which have significantly impacted investor sentiment. European equities have declined by almost 15% since mid-September and we would like to highlight this setback as a buying opportunity.