MEGA II – Not done yet

Deutsche Bank

Maximilian Uleer

Research

41 Pages

Deutsche Bank argues Europe’s equity rerating has further to run, with Germany’s recovery still underappreciated. The US–Europe forward P/E gap has narrowed from 9.0x to 4.7x, while Europe offers broader sector diversification and Germany’s improving macro backdrop could support a further relative recovery.

Key Takeaways

Valuation gap narrows: US–Europe forward P/E gap fell from 9.0x at end-2024 to 4.7x, nearing Deutsche Bank’s 4.3x target.
Concentration favors Europe: Top seven stocks represent 35% of S&P 500 weight versus 15% for STOXX 600; US drawdowns have recently been sharper.
Germany regains momentum: Manufacturing PMI exceeded 54 in August, its best in over four years, while Germany cut debt-to-GDP eight points over 10 years.
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