Bank of America Upgrades European Equities to Overweight Despite Global Growth Slowdown
Bank of America analysts have upgraded European equities to overweight, citing improving regional growth momentum and undervalued opportunities. Despite broader expectations for a slowdown in global growth and challenges from U.S. policy uncertainty, the analysts project a moderate global slowdown, with the global composite PMI new orders expected to dip from 52 to 49 by mid-2025.
The analysts forecast a 7% downside for European markets to 470 by mid-year, but expect a recovery to 500 by year-end. Defensive stocks and quality names are poised to outperform amid this environment. The analysts highlighted several positive drivers for European equities, including moderate upside for the Euro area PMI, improved credit conditions, fading inventory cycle pressures, a potential fiscal boost, and the possibility of a Ukraine ceasefire easing energy costs.
The bank believes that European equities’ recent 15% underperformance since Q2 and their pricing for weak domestic growth present a buying opportunity. Additionally, small-cap stocks are set to benefit from their domestic cyclical exposure and a potential rebound in regional economic conditions.
Bank of America’s analysts concluded that these factors justify their overweight stance on European equities versus global peers, emphasizing the tactical upside driven by relative growth momentum in the Euro area.