Exposure To “Safe Assets” Is Dangerous - Invesco

Sally Ling

25 February 2013

Stretched valuation levels in the more defensive areas of the European stock market make exposure to these so-called “safe assets” increasingly dangerous, according to asset manager Invesco.

The firm's UK-based European equities team notes that some of the intense pressures on the economy in Europe are fading, which should be a good sign for equities. “The fact that lead indicators for Europe troughed in 2012 mean we believe it suggests that GDP could start to improve in 2013. In addition, improving lead indicators in other regions signal better prospects for European exports,” Joel Copp-Barton, European product director at Invesco, said in a statement.

“Better sales combined with stable wages and input costs should provide some gradual tailwinds as we move through the year,” Copp-Barton added. He believes this could encourage the markets to be less focused on safety at all costs and start to reassess the prospects of the unloved stocks and sectors, and the very negative outlook being implied by their share prices.

Invesco currently sees particularly attractive valuation opportunities for specific companies in: pharmaceuticals at the more defensive end; financials; growth industries including aerospace and defence and commercial/professional services; as well as macro-sensitive areas such as media and construction.