BofA sees further upside to European stocks with GDP set to leap higher

by | Mar 19, 2021

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Strategists at Bank of America reiterated their ‘positive’ stance for European equities, telling clients the current vaccine ‘malaise’ would not derail the growth rebound anticipated later in 2021.
Hence their continued ‘positive’ stance on European equities and decision to ‘overweight’ financials, ‘cyclicals’ over ‘defensives’ and ‘value’ over ‘growth’.

On Pharmaceuticals on the other hand, BofA’s recommendation was to remain ‘underweight’.

Not only had the European Medicines Agency cleared AstraZeneca’s shot against Covid-19, vaccine supplies were set to improve in the second quarter and the European Union would benefit from faster economic growth Stateside, they said.

 
 

Not only was there little evidence that AstraZeneca’s shot was “harmful”, they estimated the EU’s vaccine supplies were set to accelerate from 90m doses in the first quarter to 280m in the second (20% from AstraZeneca) and 500m over the three months to September (30% from AstraZeneca).

That, they said, should be enough to completely vaccinate 60% of the euro area’s population by the end of June and all of it by 30 September.

Regarding the outlook for growth, fiscal stimulus and Americans drawing down on their savings was expected to boost US GDP 11% higher in the third quarter.

 
 

Taking away the third quarter 2020 bounce in GDP, that would be the fastest pace of growth since 1978.

In turn, they estimated that should help lift euro area GDP growth towards 7% in the third quarter.

All told, they projected European stocks had 8% upside left by the third quarter, with cyclicals and value set to outperform defensives and growth by 15%.

 
 

Banks and airlines were expected to outperform by over 20% and capital and luxury goods by 10%.

Pharmaceuticals and Utilities on the other hand were expected to underperform by another 10%.

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