The "positive signals" to be found in Europe

While macroeconomic concerns remain, the outlook for European equities is now more positive than a year ago.

One of the main reasons for this is that stock valuations are significantly lower, due to what we believe may be excessive pessimism. According to JP Morgan, in July 2018 the P/E multiple on small- and mid-cap Europe ex-UK equities was 19x, while by the beginning of March this year the one-year forward P/E multiple was 15.4x. This represents a drop of almost 20% in valuations. Slowing global growth, combined with concern about trade tensions between the US and China, has undermined investor confidence. Despite this the global economy has proved more resilient than expected with the...