Central bank quantitative easing programs have left little value in the credit markets, so Investors should be looking for returns in European equities rather than bonds, Peter Oppenheimer, chief global equity strategist at Goldman Sachs told CNBC.
The global economic crisis might have caused investors to park their money into perceived safe-haven assets such as German bunds and U.S. Treasurys with near-zero yields, but Oppenheimer said on Thursday that investors would see higher dividends in European equities. According to him, the STOXX Europe 600 could deliver annual returns of more than 7 percent - despite stagnation in the euro area
"So far, there has been a net absence of net flows going into the equity market, particularly in Europe,so equities have become almost an orphan asset class.But as more liquidity comes into the global economy through central bank actions and there is little value left in fixed-income markets, and even credit,equities will benefit by default," he said on CNBC's "Worldwide Exchange".
Goldman Sachs predicted that the current rally in European stock markets -- the German Dax is up almost 29 percent year-to-date, for instance --would continue next year.
"We think Europe will perform strongly because the valuations are still supportive and despite the stagnation in the economy in the euro zone, we do expect profits to grow through next year," he said, adding that the overall STOXX 600 had outperformed U.S. markets in 2012, despite poor earnings due to their attractive valuations.
"At the beginning of the year, the consensus was that profits would grow in Europe throughout 2012. We believed that they would fall and indeed…expectations have collapsed and profits have fallen."