Bank of America’s latest data shows the European Composite Macro Indicator (CMI) advanced in June, extending the continent’s Recovery-style cycle for the 16th straight month — the longest such phase on record. This signals a prolonged macroeconomic rebound favoring risk-on equity styles, despite ongoing geopolitical and inflationary challenges.
Recovery Style Signals: What’s in Play
In this Recovery phase, the following equity styles are currently outperforming:
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Value over Growth
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Rising Momentum stocks
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Low Quality and High Risk names
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Small-Mid caps over Large caps
According to BofA, a basket of top Recovery-style stocks outperformed bottom-ranked names by 4.5% last month, reinforcing the strength of the current regime.
Macro Inputs: What’s Driving the Recovery?
The indicator strength was led by:
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A significant rise in Germany’s IFO index, a key business sentiment gauge
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Improvement in European 10-year bond yields
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Upgraded European GDP forecasts
Meanwhile, European PPI inflation fell, acting as the most significant drag on the composite.
Fund Flows Reflect Growing Optimism
Investor positioning aligns with the Recovery thesis:
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Europe-focused equity funds saw net inflows of $3.21 billion over the last four weeks
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Passive funds: +$5.98 billion
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Active funds: -$2.76 billion
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Biggest sector/region inflows:
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Size factor stocks: +$2.87 billion
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Industrials: +$1.54 billion
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Switzerland: +$0.26 billion
Outflows dominated:
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UK equities: -$2.66 billion
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Quality stocks: -$0.44 billion
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Financials: -$0.07 billion
Get Granular on European Market Momentum
To explore stock performance in sectors benefiting from this macro uptrend, use the Sector Historical API. For deeper valuation insights on outperforming industries like Industrials or Small-Mid Caps, refer to the Industry P/E Ratio API.
