Now is the time to buy equities and the euro zone is looking good, says CIO

  • Last week's equities plunge is not a cause for fear — in fact, it's an opportunity to buy, some investment analysts are saying.
  • The Dow Jones fell a whopping 666 points on Friday, its biggest single-day sell-off since June 2016, with markets worldwide following suit.
  • The best buying opportunities are in banking, consumer and energy sectors in the fast-recovering euro zone, said Vassilis Papaioannou, chief investment officer at London-based investment firm Dolfin.

Last week's equities plunge is not a cause for fear — in fact, it's an opportunity to buy, some investment analysts said Monday as global stock markets sunk into the red.

The Dow Jones fell a whopping 666 points on Friday, its biggest single-day sell-off since June 2016. But this is not the start of a major correction, Vassilis Papaioannou, chief investment officer at London-based investment firm Dolfin, told CNBC.

Instead, the current market shift represents "an excellent buying opportunity," he said.

"I think that sell-off has been expected, because we had a very good start to the year. So we switched from greed to fear very quickly, if you look what equities have done in the first three weeks of the year."

Major U.S. indices hit record highs in January, continuing the bull run of the previous year as the Dow Jones and S&P 500 saw their best monthly gains since March 2016.

"Going forward, I think it is more that we focus on the fundamentals and earnings growth — don't forget it is still earnings season — and investors should look out for buying opportunities," Papaioannou said.

On where to look for these opportunities, Papaioannou pointed to euro zone banks in particular, as well as Europe's consumer and energy sectors, noting the recovery in Europe and outlook for rising interest rates.

"We favor the euro zone and the U.S., but predominantly the euro zone looks very interesting," he said. "Within the euro zone we favor banks, consumer and energy, because it makes absolute sense what we have seen — this continuation and this full-speed recovery that has been taking place in Europe should be reflected in the equity markets."

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The euro zone emerged as one of the best-performing major economies of the last year, according to IHS Markit's Final Composite Purchasing Managers' Index. Euro zone businesses started the year "by increasing activity faster than at any time in well over a decade," according to Reuters, and the IHS index indicated that this momentum should continue well into 2018.

Not all agree that the near future doesn't hold a correction, however. Allianz CEO Oliver Bate told CNBC during the World Economic Forum (WEF) in Davos, Switzerland, last month that there would "absolutely" be a market correction of up to 10 percent, we just don't know when. And Bernhard Hodler, the CEO of Swiss banking giant Julius Baer, recently predicted an impending correction as high as 15 percent.

Beat Wittmann, partner at Porta Advisors, told CNBC Monday that a "correction is healthy and needed in order for the Dow to hit 30,000."

Whatever their position, it seems most investors and fund managers have been waiting for a dip in the market, and while many are not too concerned, the focus now appears more on the inflationary environment.

Papaioannou, meanwhile, also brushed off concerns over increased volatility, reiterating that more than anything, the current market conditions present an ideal buying opportunity. "We're witnessing currently a rebalancing — a balancing act between earnings growth and inflation expectations," he said.