2021 will be all about earnings growth, according to strategists from UBS, who picked a selection of European stocks that they predict will deliver "rising profitability" in the coming year.
"Last year, market returns were driven by the over 50% rise in price to earnings (P/E) multiples. This year we expect multiples to play little part in returns and instead focus on the powerful earnings recovery," UBS' Head of European Equity Strategy Nick Nelson, and UBS strategist Joao Toniato, said in a recent research report.
Commodities, financials and "deep cyclicals" — sectors which benefit from economic growth such as homebuilding, mining and autos — were the sectors set to drive the 2021 earnings recovery, the strategists said.
"The top 5 sectors (energy, autos, cap goods, banks and mining) are set to provide just under two-thirds of total market earnings growth," Nelson and Toniato predicted in the note.
The UBS strategists listed the European stocks that they had screened for "rising profitability" and the ones most likely to benefit from the economic recovery in Europe as coronavirus lockdowns ease.