Credit Suisse trims Euro Stoxx 50 year-end target
Credit Suisse trimmed its year-end target for the Euro Stoxx 50 to 3,350 from 3,400 as it modestly scaled back its ‘overweight’ in Continental European equities.
At the same time, it added a little to its US equities with the proceeds and upped its S&P 500 year-end target to 2,150 from 2,050.
“The US now scores top on both our earnings and economic momentum scorecards, but valuation (with P/E relative at an all-time high), a pick-up in global IP (which is bad for the US as it is a defensive market) and rising rates (causing the US to underperform 75% of the time) leave us underweight,” said CS.
Its most preferred region is now global emerging markets following the increase of its ‘overweight’ position earlier in the month.
CS lifted its ‘overweight’ in German equities, kept its ‘underweight’ on France and raised Spain to ‘overweight’ from ‘benchmark’ saying signs of recovery there were very strong.
As far as Europe is concerned, CS said the continent was leveraged to the global cycle, which is now showing signs of turning high.
“GEM exposure in Europe is higher than that for Japan or US (and Chinese news flow improving) and this should help European equities.”
It noted Europe has nearly double the market cap weighting in banks relative to the US, but banks appear a tactical buy.
The sector adjusted price-to-earnings ratio has fallen to be 6% below the US versus a 2% premium in January. CS said once it adjusts for the normalisation of the cycle, it should be on a premium of around 11%.