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Bloomberg
There’s been a significant change of heart from JPMorgan equity strategists: US stocks are no longer preferred to Euro-area equities.
“There is a tactical opportunity opening up for Euro zone to catch up,†strategists led by Mislav Matejka wrote in a note.
The 20 percent underperformance of the region’s stocks in dollar terms over the past 18 months, combined with investment outflows amounting to
20 percent of assets under management, are part of the reason the strategists upgraded the Euro-area region to overweight, while downgrading the US to neutral.
The valuation discount has widened and the relative price-earnings ratio is now close to “outright cheap†territory, JPMorgan says. Value stocks have shown some signs of revival this month, and the continuation of a sector rotation from growth into value is also likely to support Euro area outperformance against the US, according to the strategists.
That’s not all. The poor macro backdrop in Europe is likely to change in the next few months, Matejka writes.