We have seen that: – The improvement in the European equity market’s fundamentals has already been priced in; – Given the volume of residents’ and non-residents’ inflows into euro-zone equities at present – relative to that observed in the past in the United States, the United Kingdom and Japan – share prices in the euro zone could rise even more than in the three other countries (where they rose by between 30% and 90% in three years).
The fall in the oil price, the quantitative easing programme and the euro’s depreciation have driven up share prices in the euro zone. The entire improvement in fundamentals has now been priced in: any further rise in prices can only result from the buying flows of domestic and non-resident investors. We try to estimate how much higher buying flows could send euro-zone stock market indices (the Euro Stoxx) before they level off.
To this end, we look at the previous episodes of quantitative easing in the United States, the United Kingdom and Japan. Share purchases have been larger in the euro zone than in the three other countries. This ought to lead to an even sharper rise in share prices in the euro zone than in the three other countries (where they rose by between 30% and 90% in two or three years!)
