UBS outlined a number of reasons for its "U-turn," especially given U.S. markets tend to outperform European ones.
Traders work on the floor of the New York Stock Exchange during morning trading on April 29, 2024 in New York City.In a note entitled: "A U-Turn: Favouring Europe over US equities," the bank's strategists said European stocks excluding the U.K. now outrank the U.S. on its "regional scorecard." Japan is top of its list, the U.K. is second and Europe comes in third.came in at 0.3% over the same period.
Excess savings in Europe are also higher, and not as widely used as in the U.S., and bank lending conditions for companies are looser in Europe which also could benefit growth, UBS noted.. With inflation easing more steadily in Europe than the U.S., the "path to lower rates is much clearer," UBS said.
"The ERP in Europe is 2.1pp above the US, close to a record high. The sector adjusted P/E at 18% below the US has only been at similar or lower levels when there is a recession/Eurozone crisis. We have neither," the strategists highlighted.Relative earnings momentum is also "moving in Europe's favor," UBS said, with a weaker euro and stronger PMIs expected to boost earnings revisions.
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