ING bullish on equities
13 November 2013 London
Image: Shutterstock
ING Investment Management International has said that the fundamental outlook for equities is positive, and for the first time in five years it cannot see any major 鈥榚vent risks鈥� on the horizon.
This, coupled with its expectation of an improving global economy, means it is not overly concerned about the impact of tapering on equities, said the firm.
Patrick Moonen, senior equity strategist at ING IM, said: 鈥淓quity valuations are at their highest level since 2010, and are up around 45 percent since the cycle lows. Price earnings ratios in both the US and Europe have increased substantially over the past two years, and are now close to or above their long term average. We are probably close to the top of the current valuation cycle, but we don鈥檛 expect a big decline in valuation metrics. Global monetary policy remains easy and risk-appetite supports flows towards the equity market.鈥�
鈥淓uropean third quarter earnings have been weaker than US earnings, especially on revenues, but in Japan the rising earnings trend continued in Q3. Meanwhile, notable risks to earnings are potential negative impact of difficulties in emerging markets and currency volatility.鈥�
鈥淥verall, the fundamental outlook for equities remains positive, provided (political) turmoil does not last long enough to derail investor confidence. Over the next 12 months, equity performance will more or less be in line with earnings growth.鈥�
He added that relative to corporate bond yields, equities are still attractively valued. Equity risk premia are still far above the long term averages, and they act as a 鈥榖uffer鈥� against a general rise in interest rates鈥攚hen they come.
鈥淚mproving earnings; continued loose monetary policies; a lack of event risk and a broad decline in uncertainty are all good for risk appetite. Given this, we are not overly worried about the impact on equities from the start of tapering, especially as this goes hand in hand with an improving economy.鈥�
This, coupled with its expectation of an improving global economy, means it is not overly concerned about the impact of tapering on equities, said the firm.
Patrick Moonen, senior equity strategist at ING IM, said: 鈥淓quity valuations are at their highest level since 2010, and are up around 45 percent since the cycle lows. Price earnings ratios in both the US and Europe have increased substantially over the past two years, and are now close to or above their long term average. We are probably close to the top of the current valuation cycle, but we don鈥檛 expect a big decline in valuation metrics. Global monetary policy remains easy and risk-appetite supports flows towards the equity market.鈥�
鈥淓uropean third quarter earnings have been weaker than US earnings, especially on revenues, but in Japan the rising earnings trend continued in Q3. Meanwhile, notable risks to earnings are potential negative impact of difficulties in emerging markets and currency volatility.鈥�
鈥淥verall, the fundamental outlook for equities remains positive, provided (political) turmoil does not last long enough to derail investor confidence. Over the next 12 months, equity performance will more or less be in line with earnings growth.鈥�
He added that relative to corporate bond yields, equities are still attractively valued. Equity risk premia are still far above the long term averages, and they act as a 鈥榖uffer鈥� against a general rise in interest rates鈥攚hen they come.
鈥淚mproving earnings; continued loose monetary policies; a lack of event risk and a broad decline in uncertainty are all good for risk appetite. Given this, we are not overly worried about the impact on equities from the start of tapering, especially as this goes hand in hand with an improving economy.鈥�
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