Investing.com -- Bank of America analysts upgraded European equities to overweight in a note Friday, citing improving regional growth momentum and undervalued opportunities.
This slowdown could lead to widening risk premia and renewed earnings downgrades, putting pressure on equities, according to the bank."Our base case of slowing global growth, widening risk premia and lower bond yields is consistent with 7% further underperformance for European cyclicals versus defensives, around 10% renewed underperformance for European value versus growth stocks," they wrote.
BofA believes European equities' recent 15% underperformance since Q2 and their pricing for weak domestic growth present a buying opportunity.Additionally, small-cap stocks are set to benefit from their domestic cyclical exposure and a potential rebound in regional economic conditions.