Since the start of the year, European stockmarkets have registered double-digit performance, outstripping many other developed markets in local currency terms. However, such performance has come at the sacrifice of valuations. The valuation gap between Europe and the US on the basis of forward p/e ratios has fallen to its lowest level in more than 15 years.
Thankfully, with the help of lower oil prices, a weaker currency and improving economic conditions, European companies have begun to deliver significant earnings growth.
As the eurozone economic recovery begins to pick up speed, investors who have focused on export-oriented companies should consider the longer term potential of more cyclically orientated sectors.
Vincent Juvyns is global market strategist at JPMorgan Asset Management