In recent months, stock markets have lived a roller coaster, from the fall of April to the recovery of May. After the last rebound of European markets, could we say that European actions begin to be overvalued? Which is it?
We think no. The European market, despite the strong recovery it has had after the tariff war, is even undervalued. In Morningstar we have a way to analyze companies to see whether or not they are overvalued, it is a different rating than the funds – that measures profitability and risk – while the one of actions measures the potential for revaluation (in the future) of the companies. If we rely on that rating, Worldwide we have 44% of the companies that obtain 4-5 stars, actions that are cheap and that could be considered to buy. In the European market, that percentage rises to 57% and in the United States, where we continue to see the most expensive market compared to Europe, that percentage of values drops to 30%.
If we look at American companies and see the 10 largest, there is everything. Companies that are cheap such as Microsoft, Amazon or Meta but especially Alphabet. There we have an assessment that implies undervaluation for Alphabet of almost 30% and, if we focus on the ten largest companies in Europe, there are some that quote at an attractive price such as ASML, LVMH, with an infraval of 25%, or totalenergies.
On the other side of the Atlantic, does it still be expensive despite corrections? What sectors?
At the sector and in the US there are three major sectors that are contributed with undervaluation of more than 10%: communication, energy and health, which has suffered a lot lately. And at the other extreme, expensive sectors such as the financial sector, where we see less opportunities in both in the United States and in Europe, together with utites. In Spain, if we take the two largest companies that are Iberdrola and Santander, they are overvalued. Iberdrola more than 10% and Santander in almost 20%.
If we look at the fixed income market, how is it evolving and how do you think the European corporate credit in front of the American will end 2025?
I like American fixed income but there is dollar risk and if you choose class of covered funds, a tense moment linked to the depreciation of the dollar is being seen with respect to the euro and other currencies that causes foreign investors to invest in fixed income to think about it.
In fixed income there is much more clarity on the part of the ECB than by the Fed, we are in the middle of the commercial war, and this could affect the American market. In fact, the feeling figures of the consumer are quite bad and would bet on deterioration of the American macro that I hope can result in bands of Fed types and in medium and long sections, where there is interesting potential but with more risk. The ECB will continue to cut interest rates because European economies are not in a buoyant environment and, if we look The National Bank of Switzerland will return to negative types. It is suffering the depreciation of the dollar and the only way it has is lowering interest rates and even taking them to zero and the ECB is not in such a worrying situation but it is also with some tension. We are in an interesting currency war.
What currencies do you see with more potential at the present time?
EURO and Swiss francs, act as a refuge value which is what has lost the dollar and treasure bonds. There is crisis of trust in the dollar and the euro is «taking advantage.» The Swiss frfanco is getting more expensive and the only way the Swiss bank has is to continue lowering interest rates, and in fact it is speculated that interest rates are lowered at the next meeting. I am not so sure that the euro zone suits such a strong euro from the dollar. We have not heard any conversations between the US and Europe that would have to have taken place and that is not good for the American or European economy.