UBS Sees Stoxx Europe 600 at 440 Points End-2018

Per Nick Nelson’s report date Nov 13:

« We recalibrate our top-down earnings model as it had been persistently underestimating the turn in operational leverage. We now see 10% EPS growth in 2018. Consensus estimates are 8.9%, but adjusting for the average upward bias, underlying « true » consensus may be as low as c.2%. We see modest P/E re-rating to 15.7x from 15.0x currently. For the FTSE 100, we are more conservative and target 7,900 end-2018 (c.6% upside). »

« Upside risks: Equities re-rate to previous cycle peak valuations. This would point to c.33% upside from the current levels. European corporates re-gear to US levels. US investors return (net buying peaked in May). European M&A picks up, currently running c.30% below the US. Effective French labour market reform. »

« Downside Risks: Rates and bond yields rise too sharply. But a gradual move would likely be manageable – Europe has very little Tech (6% of index) and a large amount of positively rate sensitive Financials (c.25% of index). Significant Euro strength, on our forecasts (EUR/USD 1.25 end 2018) this is manageable. Higher volatility / political risks in Spain and Italy. »

Pour les adeptes d’analyse technique

source: aurel bgc

Les commentaires suivants accompagnent ce deux charts:

A gauche (situation présente):

« Une phase de temporisation de quelques semaines à l’image de la situation graphique de 2008 reste privilégiée avant une extension baissière significative. »

A droite (configuration graphique de 2008):

« En 2008, les cours avaient oscillé latéralement pendant 4 mois dans un large range avant une reprise du ‘bear market’. C’est l’hypothèse que nous retenons pour le moment. »