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January 24, 2023

The European discount

European stocks remains at a substantial discount to the US in terms of forward Price/Earnings ratio. The discount goes through all sectors: it is the least pronounced in IT and the most pronounced in energy. To us, this hardly makes sense as these 2 sectors are by nature global where companies compete worldwide. While US companies in general appear showing a better growth profile and the US economy more solid, we are surprised by the size of the European discount and believe it will diminish over time.