JP Morgan neutralizes US vs. Eurozone stock market preference

JPMorgan analysts said in a note Monday that they have neutralized their U.S. vs. eurozone preferences for several reasons.

The bank downgraded its eurozone to underweight versus the US in early May 2023 and has prioritized the US ever since. However, the US is now overweight in the Eurozone, and the Eurozone is trading at its lowest price relative to the US at any time prior to COVID-19.

“In absolute terms, euro area valuations are at the historical median of 13 times fair value to P/E and fair value to debt. On both counts, the US is more marginal,” the firm said. explained.

“We have prioritized growth style over value through 2023 and again this year,” JPMorgan wrote. “While maintaining this slope, we note that Growth Style is already a very strong performer and given MOMO’s concentration, trading is sluggish and at risk of reversal. Of course, MOMO risks are increasing within Europe as well, but the magnitude of the potential impact will always be greater in the US market. ”

He added that while disappointment with the eurozone's relative growth “may have peaked”, the ECB could act before the Fed this time around.

“We have neutralized our US vs. eurozone preferences, but have not reversed them,” the bank added. “This is because the possibility of a market decline is increasing.”

“We note that all Level 1 sectors in the euro area are trading at historic discounts relative to the US.”