We highlight investment themes that we like and that have the added benefit of being resilient to market uncertainties and volatility. Our experience is that investors/analysts struggle to position for these events. A strong stance in either direction could end up being very wrong very quickly. Moreover, European and French equities in particular are facing two powerful cross-currents.
Downside risks are high with Greek negotiations at a crucial stage, and higher US interest rates in prospect. Moreover, French economic growth remains lacklustre, with continuing rising unemployment casting a doubt about the strength of consumer consumption going forward which had helped keep up French GDP quite well in Q1.
However, there are also upside risks, particularly relating to earnings with the (still) low level of interest rates, a weaker EUR against various currencies and lower oil prices providing the biggest boost to earnings in over a decade. We expect EPS to grow by 19% in France in 2015 for CAC 40 companies and 33% for CAC Mid 60 companies in our coverage universe.
These upside and downside risks combined with the lack of visibility on the outlook, and the high volatility of stock markets underline why we favor self-help companies and high yield equities.