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FXstreet.com (Barcelona) - According to the Economics Research Team at Goldman Sachs, "We have continued to highlight the importance of valuation as a driver of long-term returns - though we believe in the case of the European markets, in particular, offer attractive value as growth expectations built into the market have collapsed. However, equities in general remain attractive relative to other asset classes, particularly bonds."

Moreover, "we see this as both a reflection of uncertainty and an indicator of the high potential returns available in equities over the medium term. The equity risk premium - as a measure of uncertainty - is important for markets in many ways. It not only provides a guide to future long-term returns, it is also the key to explaining a number of critical relationships in the market and the pattern of relative returns that have dominated the market environment over the past five years." they add.

In our view, a slow but steady fall in the required ERP over time should unlock a number of important opportunities within the equity market.

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