Compared with the US stock market indices, the price development of the Euro Stoxx 50 has fallen back noticeably of late. While the US indices gained uplift on the back of the resurging financial and technology stocks, the price upswing in Europe was hampered by crises here.
There are hardly any differences in the profit growth expected for 2017/18 for the Euro Stoxx 50 and the S&P 500 (10-12% p.a.), with both indices in this category neck-and-neck. But Europe could come up trumps again for investors because the valuation of the Euro Stoxx is far more favourable than in the USA, thus making Europe interesting again for international investors. Seldom in the history of the equity indices has the Transatlantic PER difference been as high. In the USA, on the other hand, the Trump-induced stock market euphoria could fade further.
The political risk in the countries in which the vast majority of Euro Stoxx 50 companies are domiciled appears manageable. Due to the country’s familiar problems (politics, debt, banks), Italy remains a troublemaker and could have an impact on market sentiment in 2018.
Thanks to the above-average profit growth of companies and high dividend attractiveness compared with the other indices (3.4% for the whole of 2017), we assess the price perspectives of the Euro Stoxx 50 in a positive light. The index is one of the few equity market indices worldwide that in a historical perspective still does not appear too dear.
Due to the risk that we see of increasing fluctuations, few large-scale exposures can be expected at the current price level. In the period after the reporting season, which is gradually coming to an end and is normally characterised by a dearth of news, investors are very unlikely to miss out on an upward spike on the equity market. An alternative would be to divide up the share purchases so as to participate to at least some degree. As a result of considerable inflows from international buyers, the Euro Stoxx 50 could then gather greater pace in the coming months, but these investors are more likely to await the outcome of the general election.