European equities and the euro have an upside potential

We can now see that the valuation of European equities is weak , but not very weak ; and that the euro's exchange rate is weak, but not very weak. Yet, the net open position on the euro is very short and non-residents are massive sellers of European equities: investors are therefore behaving as if they expected a recession in the euro zone. However, the euro-zone economy is resilient as demand is clearly being stimulated: once investors revise their expectations for euro-zone growth, equity valuation will be raised and the euro will appreciate.