JP Morgan: Sell US Stocks And Buy Europe On Valuation

November 22, 2014 0 Comments

JP Morgan Chase is telling its investors to dump the dollar and gain more exposure in the European Stock Market. Momentum for Euro stocks faded since the beginning of 2014, as we can see from the following chart below. The EuroZone has performed exceptionally weak compared to the performance in the United States. However, the 22% lag behind the US has made this investment too cheap for the bulls to ignore.
Despite this, gains between the United States and Euro markets, forward PE has improved substantially. The 9.9% gains in US markets since the beginning of the quarter increased valuations to 17 times projected earnings, compared with 14.1 times for the measure tracking the biggest euro-area stocks. 
It is also good to note that stimulus measures insituted by the Federal Reserve, better known as Quantitative Easing, has helped to increase the overall size of the S&P 500 since it was first instituted in 2009. The ratio of US earnings to Euro earnings shows a gauge is close to 70, indicating the benchmark is almost overbought. The score for the Euro Stoxx 50 dropped below 30. This signals that the benchmark was oversold.

A weaker Euro is also assured to increase economic growth in the region.
Which is right on time, considering there there was an uptick in the M3  Euro money supply. This shows that there is a greater increase in economic activity. 

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