In 2014 we have seen growth rates in the Euro area which have been coming from different sources. The peripheral countries have had a more positive development than in the years before and Germany has not been the sole locomotive. The inflation rates will remain at these low levels and the steep decline in oil prices will support this. Also structural reforms of the various governments in different quality will increase the growth rates. In 2015 we have a very different situation than in the years before. The QE of the ECB will keep interest rates in the Euro area at historical lows. In contrast to this high valuations are equities still reasonably good priced. We expect an increase in earnings, which will give fundamental support to stock prices. We also anticipate that the low oil prices and the strong US-Dollar will support most of the European stock markets.

Inflation will stay at low levels and the low nominal yields on government debt will support the consolidation of public finances in the years to come. These low yields on government bonds as well as corporate bonds lead to a situation, where this asset class is no longer an attractive investment. This can be seen that fund flows from institutional as well as private investors have been positive for the first time in 2014 and this will also be the case for this year. We will also see more M&A activities in the stock markets, because the big players have either a large pile of cash at hand or able to raise money from the capital markets easily. This will also support the equity markets overall.

Martin Bruckner
Member of the Management Board
Allianz Investmentbank AG
CIO Allianz Gruppe Österreich
4 February 2015


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