Surge in European Equity Valuations

A month ago, we highlighted the continued trend of high valuations (P/CF in particular) for much of the developed markets.  No region better illustrates the extremity of this trend than MSCI Europe.  By any valuation metric, the recent surge in markets has driven constituents up to (P/B) or well above (P/CF, P/S, P/E) historic peaks:






Taken in aggregate, sector valuations in MSCI Europe currently trade at anywhere from a 20% to a 60% premium over the MSCI World average.



The story is the same when we look at valuations compared to their respective averages over the last decade-- European equities trade somewhere between 20-40% higher.



Taking a more granular look at the Industry Groups in Europe over the last ten years, we can see just how much P/CF valuations have expanded (red is high, green is low).



The last time valuations were even remotely close to being this high for the majority of constituents was in 2005/2006.