European Stocks Have Never, Ever Been This Cheap Relative To American Markets

Tyler Durden's picture

European stocks are offering the biggest discount on record relative to U.S. peers, according to one metric.

Members of the Stoxx Europe 600 Index are trading at 1.8 times the value of their assets, almost half that of S&P 500 Index constituents, the largest gap since Bloomberg started tracking the data in 2002.

 

World-beating gains in U.S. equities since the bull market kicked off in 2009 has widened the distance between the two, while recent volatility has also rendered its derivatives the most expensive relative to Europe since August 2015's China deval collapse...

 

However, it appears Europe's macro surprise data is rolling over and catching down to US macro surprise data...

 

And perhaps worse still, EURUSD is rolling over (just as it did in 2013), ready to catch down to its rates-implied level, crushing USD-relative returns...

 

But of course, it's what happens next here that really matters...

 

Yellen and Draghi next week in Jackson Hole may hint ath whether this is the end of the beginning or the beginning of the end.

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pitz's picture

Similar deal if you compare Canada to the USA.  Or the Emerging Markets to the USA. 

European multiples might be justified, but US ones definitely aren't. 

Vilfredo Pareto's picture

The market even though never entirely accurate is forecasting a brighter future for the USA than Europe.  No surprise there.  That is one of those duh forecasts.

 

All  currently available info goes into the current stock price. But it does appear overly optimistic. The unknown can only be a negative since the market is priced to perfection.

Five Star's picture

Saying never ever for a data set that only goes back to 2002 is a bit rediculous...

Europe has seen some of the worst economic growth in the world during that period. Greece, Italy, Portugal are all among the 10 slowest growing economies in the entire world since 2000. 

http://thesoundingline.com/ranking-worlds-economic-growth-21st-century-g...

TheSilentMajority's picture

It's an ugly contest between pigs.

EU stawks are very expensive. USA stawks are super-nosebleed expensive.

They both need a 50% shave before they would start to resemble slightly attractive.

Vilfredo Pareto's picture

Well.  Sometimes I look around for the cleanest dirty shirt rather than walk outside naked.  All markets vote America as the cleanest dirty shirt, except maybe some tiny nobody like Germany or Switzerland but those shirts are too small to wear.

Hkan's picture

EU keeps braking its own rules......pouring money...south.

Keeping southern corruption alive....well and healthy....

Thanks EU...good job!

Baronneke's picture

"

European Stocks Have Never, Ever Been This Cheap Relative To American Markets".

 

Shouldn't this be:  American stocks have never ever been this expensive relative to European markets......

Sky flyer's picture

They need more migrants to really pump their economy up while driving down their own population numbers through terror attacks. That should fix er right up.

BritBob's picture

 

Falklands Oil

By a ruling of the UN, Argentina will extend its maritime platform (Politica Argentina) ; New map of the maritime platform reaffirms the sovereignty of Malvinas with UN endorsement (ElCronista); Argentina enlarges its territory 35%, with a UN endorsement ...(La Capital).

 

But what is the truth...

Argentina's Continental Shelf Claims and The UN CLCA Commission (1 page):-

https://www.academia.edu/33898951/Argentinas_Continental_Shelf_Claims_-The_UN_CLCS_Commission

 

hooligan2009's picture

the failed european banking sector post the GFC in 2008  in the market indices explains most of it.

for example, JPM has a price to book ratio of 1.4, whilst DB is just 0.7 -JPM is valued at twice DB on this metric.

they are both massive derivatives players and whilst JPM dodged many bullets from criminal behavior, DB did not and had to pay fines that JPM was exempted from, destroying its equity and limiting DB's ability to service the European and Merican instituional markets.

https://ycharts.com/companies/JPM/price_to_book_value

https://ycharts.com/companies/DB/price_to_book_value

the other issue about cheapness is that it needs to be exchange rate adjusted

THE EURO WAS ISSUED AT 1.1999 (on jan 1, 1999) and traded to a low of buying just 82 US cents in 2000 all the way up to buying one dollar sixt cents in 2008.

click "all" in the chart on the RHS.

https://www.ecb.europa.eu/stats/policy_and_exchange_rates/euro_reference...

on this metric, the Euro has plunged some 25% since the GFC - after rallying 100% from its Y2K low.

pays your money and takes your choice (of metric)

Vilfredo Pareto's picture

I vote for the end of the beginning.

 

Path dependency.  She's a bitch.

 

They can never reverse those bond purchases and will have to double down again  at some point and just hope the economy grows enough balance things out.  If we are the world fiat and remain the world fiat it should work.  It is nice to have the exorbitant privilege.

BobBercy's picture

It's not surprising - the US has a far heavier weighting in Tech stocks that don't have factories or plant and equipment. Europe, with its heavy weighting in smokestack industries, utilities and oil is rich in stocks that own lots of physical stuff which generates poor returns. In any kind of melt down Europe usually does a lot worse than the US - it's certainly not a safe haven because of a lower P/B.

Herodotus's picture

Which index (US or Europe) has higher composite company debt to equity?  That might provide some indication as to relative risk.

NEOSERF's picture

Probably because Europe has never ever been in this kind of trouble before...

Hikikomori's picture

I don't think "Never, ever" means "the last 15 years".

Zorba's idea's picture

Relative to what? Bullshit vs Hogshit? The EU debt bomb vs US debt bomb. BTW, don't you love all the "Non-GAAP" commentary on CNBC...FFS.