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We have not changed our macroeconomic scenario which calls for a continued recovery in the US and in Europe. In fact, the latest developments in Europe (ECB’s initiative, TLTRO, and Spain and Italy’s stimulus packages) have strengthened the foundations of the nascent recovery in the Euro zone.

This is encouraging because we now need economic growth to justify equity valuations, as monetary policy announcements seem to have run their course (except probably for Japan). The convergence in long bond yields between the periphery and the core is coming to the end (the spread between Italy/Spain and Germany is only 120bps down from a peak of 540bps just two years ago), and so with it the theme of “normalisation” in the Euro zone.

To perform, stocks will have to deliver earnings growth and not simply hope. This is what we intend to focus on.

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Lionel Rayon

Lionel joined Schroders as part of the acquisition of Cazenove Capital in the summer of 2013, having been at Cazenove since 2005. He is a senior member of the pan-European equity team and manager of the Schroder ISF* European Alpha Absolute Return (circa $1 Billion AuM). He is also responsible for developing and maintaining a fundamental and valuation screen of European stocks. The screen forms the basis for generating ideas for potential further detailed investigation by the European team within the framework of their disciplined Business Cycle Approach. Lionel joined from Citigroup where he was a Director in the European Tech Research Team. Prior to Citigroup, Lionel had been with Schroders Securities, as a French specialist, Nomura Research Institute, as a metals & mining specialist, Enskilda and Chevreux de Virieu. Lionel graduated from Indiana University (MBA) and Institut d'Etudes Politiques de Paris (BSc economics & finance). He has 20 years of equity research experience.

Website: www.schroders.com

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