JP Morgan has turned more upbeat on Eurozone equities, lifting its rating on the region to overweight and arguing that “the time is coming up to turn bullish.” The bank sees improving valuations and potential catalysts ahead, including German fiscal stimulus, setting the stage for a rebound after months of underperformance.
Strategist Mislav Matejka said in a note Monday that while markets in the US, China, and Japan have surged to new highs this year, Eurozone indices have been largely flat until recently. He said this consolidation phase helped flush out excessive positioning and optimism, leaving the region with a “better risk-reward profile.”
Matejka pointed out that the Euro Stoxx 50 has lagged the S&P 500 by nearly 18% since its strong start to the year, but he maintained his 5,800 price target for the index. He added that valuation gaps between US and international markets remain “extreme,” and a renewed rotation into overseas equities could still play out — even if US markets face stagflation risks.
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JP Morgan’s bullish shift could support renewed investor flows into Eurozone equities, particularly if German stimulus delivers a growth boost. The call may also encourage rotation out of US markets, where valuations remain stretched.
