The Euro Stoxx 50 is now lower than it was going into the final quarter last year. Back then Brent oil was trading at around $100, EURUSD was at 1.26 and investors were relatively optimistic with only 15% of them describing themselves as bearish.
Since then the European Central Bank (ECB) has started printing €60bn a month and said it is willing to add more if necessary, the Euro has weakened by around 10% and the oil price has more than halved. Yet 30% of investors now describe themselves as bearish, the highest proportion since 2012 and valuations are back down to their long term average. We think the low oil price, low euro, low borrowing costs, reasonable valuations and already weak sentiment will support European equities from here.
Since then the European Central Bank (ECB) has started printing €60bn a month and said it is willing to add more if necessary, the Euro has weakened by around 10% and the oil price has more than halved. Yet 30% of investors now describe themselves as bearish, the highest proportion since 2012 and valuations are back down to their long term average. We think the low oil price, low euro, low borrowing costs, reasonable valuations and already weak sentiment will support European equities from here.
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