Goldman Sachs Optimistic About European Equities in 2020: Bloomberg

Goldman Sachs Group Inc’s GS manager, who predicted 2019’s rally in equities, is betting on the European equities in 2020, according to Bloomberg.

What Happened

Head of Global Portfolio Solutions for EMEA and Asia Pacific, Shoqat Bunglawala said that Europe’s growth prospects are not as gloomy as most investors think.

“The market seems to be pricing in a more negative growth outlook than we expect,” said Bunglawala to Bloomberg.

Earlier in November, GSAM’s global multi-asset funds turned overweight on euro-area cyclical.

Bunglawala is also hopeful that “Europe will avoid a recession and that’ll help cyclical stocks.”

Why It Matters

Bunglawala’s statement came after Boris Johnson’s U.K. election victory and the U.S.-China phase-one trade deal, which helped ease some of the investors’ biggest concerns over European markets.

The Stoxx Europe 600 jumped to a record intraday high on Monday. European cyclical, however, did not perform as good as their U.S. counterparts this year. The MSCI EMU Cyclical Sector Index jumped 21% this year, while its U.S. counterpart surged 31%.

Bunglawala is mainly betting on euro-area banks, which, he says, aren’t being recognized for their improving bad loan and capital levels.

The Euro Stoxx Banks Index surged 11% this year, about half of the Stoxx Europe 600’s gains in 2019, with the sector suffering from negative interest rates.

While Bunglawala suggests sticking with risk assets into 2020, he says that investors should not expect big gains in 2019.  

“We’d expect the expansion to continue but given what’s been priced into the equity market already, with trend-like economic growth, we’re likely to see more moderate returns,” said Bunglawala.