The potential for portfolio rotation into equities is considerable in the euro zone

Equity return s and valuation s are lower in the euro zone than in the United States for two reasons: The magnitude of share buybacks in the United States ; The weak demand for equities in the euro zone due to savers’ high risk aversion. But the return on risk-free bonds will now be negative for many years: this may lead savers to turn to equities much more than before and, when comparing the euro zone and the United States , we see the considerable potential for portfolio rotation into equities in the euro zone. The possibility of European equities catching up in terms of valuation is therefore a hypothesis that must be taken seriously.