European markets are now fully pricing in an economic recession, analysts are expecting a recession but believing stocks can go higher.
Main takeaways on European Equities:
Tiger Legatus Master Fund was up 0.1% net for the second quarter, compared to the MSCI World Index's 7.9% return and the S&P 500's 8.5% gain. For the first half of the year, Tiger Legatus is up 9%, while the MSCI World Index has gained 13.3%, and the S&P has returned 15.3%. Q2 2021 hedge Read More
- Expect a recession to have begun in the fourth quarter of 2011
- Expect earnings estimates to be lowered about 5%
- …BUT expect stocks to go higher about 10-15% given that equity risk premium priced into market is near 2009 peak and P/E valuatoins near their lowest levels since the 1980?s.
Barclays is out with a really interesting graph of European Cyclically Adjusted P/E (CAPE) Multiples, graph points to multiples lowest since the 1980?s: