Bank of America analysts see a 10% renewed downside for European value stocks versus growth by the fourth quarter. The bank said in a note Friday that they expect a shift of focus from inflation worries to growth concerns.
The bank sees "scope for the market's current inflation concerns to dissipate, as inflation has now largely recoupled with the trajectory implied by gauges of supply-chain stress, following the undershoot in H2 last year, with the current level of supply-chain stress pointing to continued disinflation."
However, analysts are concerned about the macroeconomic outlook. They also highlighted the risk of a weakening US labour market.
"Our macro projections imply around 15% downside for European equities (we remain negative) and 15% underperformance for cyclicals versus defensives (we remain underweight)," the bank said.
"Analysts also point to 10% renewed downside for European value versus growth by Q4, following the recent outperformance, leading us to lower value versus growth from marketweight to underweight."