Europe on sale: European stocks never so discounted. Because?

If you appreciate the equities of the Old Continent, they are the balance, especially when compared to the US, as noted by Michael Msika, commentator of Bloomberg. European stocks are currently offered at a 25% discount compared to their US peers, and that doesn't necessarily get worse.

Europe has never been so cheap compared to the US The MSCI Europe Index hit a record of around 30% off its US counterpart this month, based on forward P / E ratios, after the latest Earnings season fueled further forecast updates for European companies

MSCI Europe index compared to the US equivalent, where 100 is the parity

European valuations seem much more reasonable than the US ones, at least in absolute terms and profitability: in fact, while the P / E forward (On the earnings of the year to come) on the US is around a record of about 22 times, the P / E of Europe is equal to 15, with room for growth, at least theoretical, also because in the past the value of the European P / E has also been at higher values.

So, at least in theory, there would be substantial reasons to prefer stocks from the old continent ahead of 2022, with expectations of sustained growth over the course of the year.

The same optimism should extend to the UK, according to Morgan Stanley, as UK equities also outperformed US stocks.

UK stocks are trading at a record discount to their global counterparts, while offering the highest dividend yields.

But we can now ask ourselves a few questions: how realistic can this picture be and be realized?

European stocks have several unknowns:

• first of all, the European economic system is potentially even more exposed to stagflation and energy shocks that can mark the growth of European companies in 2022;
• the European economy as a whole appears to have a depressive tendency;
• one wonders, in the event of a bubble burst on US stocks, to what extent their European counterpart would be immune to negative spillovers.

So if the prospects for a better performance of European stocks are well founded, the need to think “Cum Grano salis” still remains.

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The Europe article on sale: European stocks never so discounted. Because? comes from ScenariEconomici.it .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/europa-in-saldo-i-titoli-europei-mai-cosi-scontati-perche/ on Wed, 17 Nov 2021 10:00:06 +0000.