BCA's 'buy Europe' call comes with four words: bank on the banks
XLF•BCA Research recommends buying European banks, saying reforms, consolidation and a valuation advantage over the United States support further upside in European markets.
1. Europe’s investment case
BCA Research said Europe is emerging as a compelling global investment opportunity, citing reforms, consolidation and a valuation advantage over the United States. The firm said Europe has outperformed the US in equity and currency markets over the past two years despite high energy prices, the US-led artificial intelligence investment boom and global trade tensions.
2. Banks lead the call
European banks are BCA Research’s preferred way to invest in the theme, supported by an earnings renaissance, greater market integration and structurally higher interest rates. The firm also recommends European telecoms, utilities and industrials, and remains structurally bullish on the euro against the US dollar.
3. Risks and valuation
BCA Research said Europe’s valuation advantage is backed by deep domestic savings and broad fiscal flexibility despite French budget constraints. It said falling behind the US in artificial intelligence has not harmed European performance and will not hold it back going forward.
