Equity strategists at JP Morgan sounded a positive note on the outlook for European stocks, revising their target for the Euro Stoxx 50 benchmark index higher in the process.
Having reached their previous target of 4,180.0 during the previous week, the broker set a new target of 4,500.0.
Despite the “increasingly bearish narrative by numerous pundits”, Mislav Matejka noted how the consensus had revised higher its estimates for companies’ earnings per share by 16% since January.
As a result, forward price-to-earnings multiples had shrunk from 17.7 times to 16.7 for shares in the MSCI Eurozone eve as the Euro Stoxx 50 had jumped 19% year-to-date.
Furthermore, while the pace of EPS revisions was peaking, JP Morgan expected them to continue in the back half of 2021.
Indeed, revisions tended to be positive as long as composite PMIs remained above the 54.0 point mark.
Higher bond yields weren’t a threat either.
“The correlation between bond yields and P/E multiples has, if anything, been more positive than negative.”