Both the US and European indices record new records. JPMorgan Chase strategists believe the rally can go on, even expanding to markets that are lagging so far.
The Stoxx Europe 600 has set new records. Optimism after better reports improved sentimentality and supplanted coronavirus fear. JPs give importance to the growth of the index, because with the passage of over 400 points, the index is already up by 8%. In the previous cases, the index after passing more than 400 points has undergone a correction.
However, times are different. Unlike in the past, the Eurozone’s production index is starting to rise, which provides a good basis for stock appreciation. In addition, only 23% of companies in the Stoxx 600 index are trading at record levels. This leaves more room for further rise.
At the end of September 2019, JP analysts raised their ratings of European stocks to overweight and then predicted their further appreciation. Analysts are underweight to US and UK equities.
Another factor that supports the growth of the Stoxx 600 is the increase in dividends and its discount in value compared to bonds and world equities.
The expected rebound in bond yields also implies an appreciation of European stocks, leaving the banking sector sensitive.
Spanish and Italian stocks are expected to rise further, according to JP.
Source: Bloomberg Finance L.P.
Graphs: Used with permission of Bloomberg Finance L.P.
Trader Martin Nikolov