Earnings, FCF Expected To Be Key Drivers In Europe This Year

Earnings momentum strategies don’t work well at turning points in the economy, and they lost money in Europe during the second half of last year, but now that cheap stocks have been re-rated and PE multiples are compressed, Citi analysts think earnings momentum is back on.

“With the valuation gap between cheap and expensive stocks close to 25-year lows, we have suggested that earnings leadership/momentum will be a key driver of price leadership within European equities in the coming 12-18 months,” writes Citi analyst Jonathan Stubbs

Autos, basic resources, banks, and insurance sectors give the best combination of low PE multiples...