VIDEO: Are European stocks undervalued?

Inflation. Interest rates. Recession. 

In Europe, the same buzzwords are floating around financial markets, as they are in US. But the situation is different – and so are valuations. 

Morningstar, the leading financial research firm, recently published a report, Q2 European Equity Market Outlook, diving into the climate in Europe and, namely, the undervaluation of European stocks. 

Michael Field, European market strategist and contributor to the report, joined the Invezz podcast off the back of this to chat about the current state of play in Europe.

The ongoing battle against inflation is obviously an unavoidable topic, as is the ECB’s interest rate policy approach to tackle the crisis. Europe is behind the US on interest rates but Michael stressed how stark the pace of the rise on the continent has been. It may seem like Europe is behind, but the liquidity squeeze has been felt just as harshly over this side of the pond as it has in the states.

I asked Michael whether the recent banking chaos has changed the ECB’s plan going forward, and how this will filter down into valuations. But the market is still implying there are hikes inbound, despite the wobble led by Credit Suisse, meaning inflation remains public enemy number 1. 

So how does this all feed into stock valuations, and why do Michael and Morningstar believe there are discounts to fair value across the board?

Michael discussed these big questions and more on the episode, including which sectors are more undervalued than others, how valuations as a whole stack up against the US, whether the European energy crisis is now over, and what the future holds in general for the continent of Europe. For any European investors among our audience, this one might be a refreshing change-up!

Continue the conversation on Twitter with @InvezzPortal, @DanniiAshmore and @MorningstarInc. Or visit www.morningstar.com for more information.

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