The stock market has gone nowhere for the past 5 months. It's now looking like a bargain.
The S&P 500 has stagnated over the past five months, leading to speculation that equity valuations are now attractive. With the forward price-to-earnings ratio dipping below both the five-year and ten-year averages, market participants are weighing the potential for a rebound. This stagnation in equity markets could influence currency flows as investors reassess risk versus reward, particularly if a recovery occurs.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). MarketWatch's perspective aligns with this sentiment, as a stock market recovery could favor a stronger euro against the dollar.
How firms align
Goldman is continuing to emphasize a bullish view, targeting 1.12 in the near term. In contrast, BofA's more cautious stance puts them at 1.04, suggesting a divergence in opinions based on current market sentiment. Details can be found in our internal reports: /reports/goldman and /reports/bofa.
What the data shows
Recent revisions highlight a cautious optimism, with expectations for the EUR/USD pair to be influenced by the broader recovery in equities. For further insights, see our related research at /research/equity_recovery_analysis.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01The S&P 500's stagnation has led to a more attractive valuation environment.
- 02A potential market recovery could strengthen base currencies like the euro.
- 03Watch for movements around 1.075 in EUR/USD; significant shifts could occur.
- 04Market sentiment is fragile, influenced by both equities and macro data releases.
Market implications
Next week will be critical as we approach earnings season, which could set the stage for volatility. A decisive move above the 1.075 level in EUR/USD may signal bullish sentiment among traders, aligning with equity market recovery narratives.
Risks to this view
A reversal in equity sentiment, particularly if inflation data or interest rate decisions come in hotter than expected, would invalidate the bullish view on risk assets and could pressure the euro against the dollar.
Sentiment by currency
USD~EUR~JPY~GBP~Composite USD score: +0.00
Sources & References
How we cover this story