Value in Europe? Not Yet

European stocks seem cheap, but we think they'll get much cheaper down the road

Samuel Lee 9 December, 2011 | 11:09AM
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Read more from Morningstar's Global Equities Week here.

We're in strange seas, where a downgrade of U.S. debt causes Treasuries to soar and economists prescribe more debt to cure a debt hangover. Tossed by the violent eddies and streams of sentiment is Europe. Dare we ride it into the unknown? The rewards are tempting. By a slew of valuation measures, European stocks look cheap compared to historical levels. European equity cashflows look juicy and if the authorities contain the crisis investors can expect a massive rally as cashflow-to-price multiples expand from their depressed levels. However, European equities may be a value trap.

Risk
Let's walk through the nightmare scenario spooking the markets:

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Samuel Lee  Samuel Lee is an ETF Analyst with Morningstar.

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