Negative Equity: Our European Markets Barometer For August

At the end of August all the segments of our European Style Box and all the sectors traded with a Price/Fair Value below 1

Fernando Luque 7 September, 2022 | 8:33AM
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Experts measuring the market

August was a negative month for European equity markets. The Morningstar Europe NR Index lost a significant 5.0% in euros, but with a big difference across company styles. Essentially, growth companies suffered much more than value companies. Indeed, the Large Growth segment of our European Style Box lost 6.2% in euros, while the Large Value segment managed to limit the loss to 0.7%.

The 0.7% gain in the Small Value segment is striking. This is explained by the strong performance of Turkish banks and Turkish stocks as a whole located in this segment of the style box: the Morningstar Turkey Index rose 21.3% in euros in August.

On the Large Growth side, losses in ASML Holding NV (ASML) and Novo Nordisk A/S (NOVO B) impacted heavily in this style’s return, falling 12.5% and 6.7% in euros respectively.

Among the large value companies, British oil companies stood out in particular: BP PLC (BP.) and Shell PLC (SHEL) gained 8.2% and 2.8% in euros respectively during August.

Barometer Heat Map

The energy sector was, in fact, the only sector to finish August in positive territory, with a gain of 2.9% in euros. The financial sector also performed comparatively better than the other sectors as it managed to contain its loss to 1.2% in euros.

The worst performing sectors were real estate and technology, with losses of 8.9% and 7.3% in euros respectively.

Sector returns

In terms of valuations, August saw an unusual occurrence. All segments of the Style Box and all the sectors closed the month with a Price/Fair Value below 1, which means that all segments and all sectors can be considered as undervalued by the Morningstar standards.

That said, some are cheaper than others. Value is still cheaper than growth, for example, and regarding sectors, financials, with a P/FV of 0.75, is certainly one of the most attractive at the moment.

Morningstar Europe Barometer



The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Fernando Luque

Fernando Luque  is Senior Financial Editor at Morningstar Spain 

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