Putin’s Ghost Haunts Europe Again—But The Setup Isn’t 2022
Putin's power
Markets are once again whispering the same word that haunted investors in 2022: energy. Putin’s geopolitical shadow is creeping back across European assets, but this isn’t the same setup. Gas prices are far below crisis peaks, earnings revisions remain positive, and Europe may be less fragile than the trade assumes.
The hit in 2022
The de-rating in Europe was especially sharp in 2022.
Source: Datastream
That GDP hit
Higher oil prices would be weighing on GDP growth for several quarters.
Source: Morgan Stanley
Not cheap this time around
Europe is trading at the 84th percentile of its historical valuation range.
Source: Datastream
Still cheap vs US
Europe trading at a deep discount to the US. Europe relative to US 12m forward P/E.
Source: Datastream
This looks vulnerable
Flows into cyclicals have been strong, again increasing vulnerability.
Source: EPFR
Some growth (to erase)
GS: "We forecast STOXX Europe 600 EPS growth at 5% and 7% in 2026 and 2027."
Who would be surprised if this mid single digit growth ends up at zero?
Source: Haver
Numbers actually up
There has actually been an upward revision of earnings for European companies since the start of the conflict. Chart shows EPS revision since start of the conflict (26th Feb, 2026).
Source: Datastream
2022 revisions
2022 was one of the best recent years in terms of upwards earnings revisions.
Source: FactSet
A 10% rise
A 10pp rise in Brent boosts SXXP annual EPS growth by 2pp, but lower growth would be an offset.
Source: Goldman
TTF well below
TTF natural gas prices remain well below their peak of 2022.
Source: Morgan Stanley
Consumers
Consumer confidence took a real hit in 2022 but adjustment of actual spending was much more progressive.
