MacroResearchBoard

Euro Area Stock Rally Will Run Long – January 23, 2023

A just-published report reinforced our call for euro area outperformance in a global equity portfolio. While stock performance has perked up significantly in recent weeks, the depressed level of euro area 12-month forward earnings relative to those of the global benchmark underscores that there is ample room for the recent upturn to run. An expected further appreciation of the euro versus the U.S. dollar and attractive valuations offer further support.

Euro area relative forward earnings are pro-cyclical given the composition of the region’s broad equity market, while prospects for the relative earnings of key cyclical sectors that drive the market, including consumer discretionary, industrials and financials, are positive and biased upward.