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17 May 2013
Flash: European yields suggest growth scarce – Goldman Sachs
FXstreet.com (Barcelona) - Given the low European interest rates, weak economic activity and a high-risk premium have made yield, predictable growth and safety attractive to investors.
According to the Economics Research Team at Goldman Sachs, “We continue to believe that companies with high yields that have balance sheet strength and can grow dividends will perform well. The search for growth, however, may shift towards earnings prospects and away from the top line. The premium for top line and safety should moderate in our view.
The winning sectors in recent years have not necessarily been economically ‘defensive’; telecoms and utilities have been among the worst performers. The best performing sectors have offered economic defensive characteristics together with stable top-line growth – a combination of growth with safety. “The valuation of these stocks has reached levels that look, in our view, too steep given the moderating risks and improved forward global growth prospects. The significant outperformance of the SMI, despite a lower ERP over recent months, illustrates this point.” the team adds.
According to the Economics Research Team at Goldman Sachs, “We continue to believe that companies with high yields that have balance sheet strength and can grow dividends will perform well. The search for growth, however, may shift towards earnings prospects and away from the top line. The premium for top line and safety should moderate in our view.
The winning sectors in recent years have not necessarily been economically ‘defensive’; telecoms and utilities have been among the worst performers. The best performing sectors have offered economic defensive characteristics together with stable top-line growth – a combination of growth with safety. “The valuation of these stocks has reached levels that look, in our view, too steep given the moderating risks and improved forward global growth prospects. The significant outperformance of the SMI, despite a lower ERP over recent months, illustrates this point.” the team adds.