Investors should consider an underweight stance towards European equities as downward pressures on the asset class are likely to increase, according to S&P Capital IQ Equity.
The S&P Capital IQ Equity Research reveals that risk assets appear to be fully valued and predicting declines in peripheral equities in absolute terms.
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S&P Capital IQ chief European equity strategist, Robert Quinn, said: "The Citigroup Economic Surprise Index for the eurozone turned negative on 27 March 2013.
"When this has happened in the past, empirical evidence shows equity markets have fallen an average 5.9% in absolute terms by the time an eventual trough in the series is reached."
Quinn added, "Old economy stocks have traditionally had the highest correlation to composite (purchasing managers’ indices) and we are now underweight both chemicals and basic resources. "
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