Morningstar has published its latest Europe Equity Market Outlook: Fourth-Quarter 2022, showing data and analysis European equity markets for the fourth quarter of 2022.
Here’s the main bit:
Investor confidence has fallen to lows not seen since the very beginning of the coronavirus pandemic. This is, of course, unsurprising given the array of risks out there: high inflation, rising interest rates and a potential escalation of the war in Ukraine, all culminating in increasing chances of a recession in Europe.
Capital Economics is forecasting European Central Bank rates rising to 3% in 2023, up from where they currently stand at just 75 basis points. Combine this with massively rising domestic energy prices and it’s clear that households will be stretched this winter. Governments around Europe are implementing caps and support programs to help, but all of this comes at a cost
Michael Field, CFA, Market Strategist and Carys Helm, Associate Equity Analyst at Morningstar commented: “So far this year equity markets have fallen each consecutive quarter, bringing year-to-date losses north of 20% and wiping out any gains made in 2021.
“Despite the worsening macroeconomic picture, our aggregate fair value estimate hasn’t budged materially, meaning attractive upside opportunity remains.
“On a price/fair value basis, the European market is now the cheapest it’s been since the very beginning of the pandemic, with roughly 20% upside from here.
“While recessionary fears across the eurozone are very real, we believe the market is focusing too much on short-term negativity and ignoring the longer-term prospects.”
Europe Equity Market Outlook: Fourth-Quarter 2022
