To The Moon

Deep Trouble, (but) Deep Value: despite [or perhaps because of!] all the bad news, challenges, threats -- a big shift has happened in European equities... (1/x)

The combined PE ratio (average of the forward PE, trailing PE, and PE10 ratios) has dropped to extreme cheap levels.
It is more or less on par with levels seen:
-at the bottom of the dot-com bubble burst bear
-and the 2020 pandemic panic

That said, it has yet to plumb the absolute lows seen during the global financial crisis and subsequent European sovereign debt "echo-crisis"

Two cautionaries:
1. Although cheap, it could get cheaper.
2. The “E” side of of the PE ratio is a moving target
e.g. if earnings were to fall fast it could make valuations seem a little bit less cheap than what they appear now...

But practically speaking, rather than acting on valuation alone, we’d rather see a confluence of factors — a full puzzle picture: e.g. cheap valuations + monetary easing + better leading indicators + signs of alleviation of energy/geopolitical issues, and things of this nature.

So while valuations at these levels do more accurately reflect the risks, it may not be cheap enough yet to compensate for all the bad macro (at least in the near-term — further out it could be a good point to start scaling in, which has historically been the case).

So there you go: something perhaps non-obvious, something most investors would likely rather avoid, and certainly something to ponder and place on the watch-list...

 https://twitter.com/topdowncharts/status/1579959922418032641