Is now a good time to invest in Europe?

What is the outlook for European stocks?

We see the Euro StoXX 50* (SX5E) index trading around the EUR 4,550-4,650 range. Third-quarter earnings season is coming to an end and european companies have shown negative earnings growth, but there is a big divergence between the largest European companies, where the growth is holding up better than in the rest of the market.

• We think earnings growth is likely to stay weak for the next few quarters before improving in the second half of 2024.
• Earnings expectations for 2024 have started to come down, but we think they will come down a bit more. Therefore, we are slightly below consensus for 2024 and 2025 earnings.
• We think SX5E can show close to a 2% earnings growth in 2024 and improve to 5% in 2025.
• The market should look through the earnings weakness and thus we expect a further re-rating of European equities to 12.75x from current 12x NTM PE.

Are shareholders’ returns attractive in Europe?

The region continues to offer a 3.5% annual dividend yield and European corporates are increasingly doing buybacks.

What we’re watching: We are concerned about developments in China and global macro-economic data given European indices’ reliance on the cycle. The dollar’s recent strength has also been a headwind that bears watching.

Our view: SX5E €4,500-4,600 by mid-2024

€4,550-4,650 by year-end 2024

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What is the Euro Stoxx 50 (SX5E)?

The Euro Stoxx 50 is a stock market index that represents the performance of 50 of the largest and most liquid stocks from 11 Eurozone countries. These countries include Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. The index is designed to reflect the overall performance of the Eurozone's leading blue-chip companies across various sectors, making it a key benchmark for investors seeking exposure to the Eurozone equity market.

Investors often use the Euro Stoxx 50 as a gauge for the economic health and stability of the Eurozone. The index is weighted by free-float market capitalization, meaning that companies with larger market capitalizations have a greater impact on the index's performance. As a result, the Euro Stoxx 50 provides a diversified and representative snapshot of the region's stock market.

Traders and investors use the Euro Stoxx 50 for various purposes, such as benchmarking their portfolios, tracking market trends, and making investment decisions. It is important to note that, like any investment, the Euro Stoxx 50 carries risks, and individuals should conduct thorough research or consult with financial professionals before making investment decisions based on the index's performance.

In summary, the Euro Stoxx 50 is a widely followed stock market index that represents the performance of 50 major Eurozone companies, serving as a crucial tool for investors to assess and navigate the dynamics of the European equity market.

All outlook estimates represent the midpoint of our range. GDP and inflation numbers have a +/-10bps range, rates have a +/-25bps range, and all other outlooks are within the range that is provided. Estimates, forecasts and comparisons are for illustrative purposes and are as of the dates stated in the material. Please refer to “Definition of Indices and Terms” for important information. Past performance is no guarantee of future results and investors may get back less than the amount invested. It is not possible to invest directly in an index.