BofA bears turn bullish on France
EWG•BofA upgraded French equities to overweight from market weight after a 7% absolute pullback and more than 3% underperformance versus Europe. The bank’s strategists expect the STOXX 600 to fall a further 7%.
1. France upgraded
BofA European equity strategists upgraded French equities to overweight from market weight, citing their sharp underperformance. French stocks have fallen 7% in absolute terms and underperformed the European market by just over 3%.
2. Valuation and spreads
French equities have underperformed by more than 20% since spring 2024, leaving their 12-month forward price-to-earnings ratio at a 5% discount to the market, the largest discount since late 2016. BofA’s rates strategists expect the OAT-Bund spread to stay within a 100-150 basis-point range; it was 134 basis points at the time of writing.
3. Broader caution
France is one of the few cyclical overweights in BofA’s otherwise defensive portfolio. The strategists expect a further 7% downside for the STOXX 600, citing concerns about the sustainability of the AI capital expenditure boom.
