According to Goldman Sachs Group Inc., the complex macroeconomic situation in Europe might have a negative impact on stocks, despite a positive risk-reward balance, tax incentives and measures aimed at efficient energy use.
The investment bank is cautious about the region due to the energy crisis, monetary tightening, and the upcoming parliamentary elections in Italy, Goldman Inc. strategists said in a note on September 12.
“The energy crisis is expected to result in a recession for European economies, albeit relatively moderate. Economists predict a prospective monetary tightening by the ECB and the Bank of England,” claimed Cecilia Mariotti, the expert at Goldman Sachs. The investment bank continues to underrate European stocks as rising current prices reflect comparative risks for the US as well.
This year, European assets have been outdone by the S&P 500 index by more than 10% in dollar terms. However, Eurozone markets have been much more affected.
No major changes have yet been made to expected earnings for the following 12 months, as Bloomberg notes. Although Eurozone revenue estimates have declined this year, they are still above the lows reached during the 2008 financial crisis.
Source: Bloomberg