JPMorgan strategist Gimber sees value in European equities following a sharp decline in oil prices, which has led to depressed valuations. The lower energy costs are expected to boost corporate margins and consumer spending across Europe, making currently undervalued stocks more attractive.
The call indicates a contrarian shift from an underweight to an overweight position in European stocks, particularly in cyclical sectors highly exposed to energy costs. The DAX, representing Germany's industrial and manufacturing base, is expected to benefit disproportionately from reduced input costs.
This positive outlook hinges on oil prices remaining stable at reduced levels for a sustained period. A sharp rebound in oil prices is identified as a key risk that could derail this investment thesis. Gimber's view contradicts the prevailing market pessimism towards European equities, which have lagged their US counterparts after an initial strong start to the year.
