Bonds No Match for Equities as Europe Decline Drives Up Yields
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Stocks are the most attractive in four years relative to bonds
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Speculation of further ECB stimulus drags bond yields lower
The selloff in European equities has again pushed them into the sights of investors seeking for better returns than those offered by bonds.
Looking at earnings yield, companies in the Euro Stoxx 50 Index are more attractive than at any time since 2011 relative to government debt after equities lost as much as 21 percent from this year’s high on concern the global economy is slowing down. At the same time, increasing speculation that the European Central Bank will extend its unprecedented stimulus pushed rates for bonds to their lowest levels since May.
“It’s quite a straightforward valuation argument,” said David Hussey, head of European equities at Manulife Asset Management in London. “As long as the recovery continues, margins will recover, so that will push earnings growth and should put a rocket under European equities.”…
Bonds No Match for Equities as Europe Decline Drives Up Yields
