Deutsche Bank on Why Europe is Not as Cheap as it Seems

Deutsche Bank Research analysts Binky Chadha, Keith Parker, John Tierney and Parag Thatte evaluate asset allocation between Europe and the U.S. in the light of the recent re-rating of European equities. Based on a host of factors, they conclude that Europe is more expensive than it looks.

Post July outperformance (+8%) of European equities versus U.S.

The analysts question whether the recent re-rating of European stocks is justified by forward earnings growth. Relative valuation for Europe has swung between the bottom up consensus of earnings growth and the upper end of the band. The re-rating since mid-July has taken relative valuation from slightly below average to near the top of the band. “At a 6.5% valuation premium it...