Barclays predicts some stocks like BP could rally more than 50% next year

Barclays Bank Building

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Barclays has backed European equities to reach new highs in 2021, with two stocks offering 13% potential upside for Stocks 600 and over 50% potential returns.

In their 2021 outlook, equity analysts at the bank said that the stock market rally would be driven mostly by earnings-per-share growth, bringing the Kovid-19 epidemic under control with high-efficacy vaccines, and about the strengthening There will be a return to normality. For cyclical shares.

Economists at Barclays next year see a 5.4% increase in the 2010 global gross domestic product (GDP) that they project, which would facilitate a nearly 45% increase in earnings for European corporates.

Barclays’ largest overweight stock for 2021 is Oil Major BP, for which it sees 63.7% upside potential, followed by Dutch bank ABN Amro with 50.6% and British telecom company BT Group with 47.2%.

The biggest loser of the year is expected to be Lufthansa, for which Barclays sees a -46.1% potential downside, Dutch payment company Aiden (-34.1%) and British online supermarket Ocado (-30.5%).

Head of European equity strategy at Barclays, Emanuel Kau said, “Central banks and governments have the ammunition to help sustain recovery, the financial conditions are favorable, and flexible disposable income, higher savings and profit recovery.” Demand has increased. ” In the report.

Kau acknowledges that the short-term outlook as the vaccine rollout remains uncertain and that the long-term social impact of the epidemic is still up in the air, while recent rapid uptake for markets left little room for positive surprises.

However, Barclays has a place for “relative safe havens” such as bonds, cash, developed markets, US growth and defensive stocks with less ownership riskier assets, such as emerging markets and continued rotation in European equities, cyclicals and value stocks lets see.

“Given the large production gaps, we expect expansionary monetary and fiscal policies to remain firmly in place. China’s recovery is broadening, while in the US and Europe, both consumer spending and capex should rebound, and services. Must catch up with manufacturing, ”Kau said.

“Against this backdrop, bond yields are more likely to decline, which, along with a weaker dollar, should give a leg up to reflex trading, supports value and cyclical.”

Fly open for safety

While warning that this normalization route would likely be bumpy, Barclays suggested that dips should be purchased during the harsh and unstable winter.

However, sentiment has gained more momentum in recent weeks, with Kau pointing out that the situation has not yet generally taken hold, indicating that “a two-year-long flight time to safety may just begin. “

In terms of regional allocation, Barclays is positioning more developed markets and more emerging markets than Europe versus the UK, while the market is weighing Europe and the US.

At a sector level, Kau’s team is overweight financial, industrial, material and consumer discretionary stocks (non-essential goods and services), and underweight healthcare, consumer staples, telecom and real estate. Utilities, technology and energy are all in the market.

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