For fixed income investors, macro fundamentals remain the primary concern. Paul Shanta, co-manager of the Old Mutual Absolute Return Government Bond Fund, believes we should expect to see a re-pricing higher in inflation expectations as “Draghi has again proved he is willing to ignore his critics and push on, doing what it takes” to stabilise the eurozone.
He added: “While European unemployment continues to fall, there is still a huge amount of spare capacity in mainland European economies and unlike the US and UK, there appears to be little flexibility over the potential for fiscal stimulus.”
Another note of caution comes from Adrian Lowcock, investment director at Architas, who stressed Europe is “not out of the woods yet”, particularly as the banking sector remains weak and could be in need of further financial support.
“Markets usually respond positively to further QE as it means more money flowing into bonds and then shares,” he said.
“Investors should be careful when considering investing in Europe, the political risk makes it very difficult to navigate Europe over the next 12 months as the results of elections could have a significant impact.”