Global economies are emerging from lockdown whilst also coming under increasing inflation pressure due to renewed consumer demand and supply. Against this backdrop, earnings outlook for Europe remains robust and the region provides attractive income generation ideas, particularly in green bonds.
Whilst rising Covid-19 case numbers are attracting attention in some countries, they should not lead to widespread new lockdowns due to the strong vaccination rollout. Economic growth is sound and is expected to peak in 2021, but hold steady in 2022, led by reviving consumer demand (fuelled by pent-up savings) and government support schemes. Global supply issues, reopening of economies and surging energy prices are combining to produce an uptick in inflation, affirming our view that not all components of inflation will be ‘temporary’.
The environment trend is at the heart of all post-pandemic stimulus packages in developed countries, but particularly in Europe, where a strong momentum in ESG investing in 2021 is also visible. The implementation of the Next Generation EU plan will accelerate the energy transition and further the transformation to a greener and more resilient Europe.
