The Tell: Why JPMorgan says it’s time to switch to Europe stocks from U.S.

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A stagnant economy, interest rates below zero and governments unwilling to unleash fiscal stimulus.

That’s the backdrop for European stocks, and it’s no surprise they have struggled versus their U.S. counterparts. But analysts at JPMorgan say there’s a tactical window of opportunity for the eurozone as they upgraded stocks on the Continent to overweight from neutral — and downgraded U.S. equities to neutral from overweight.

The JPMorgan analysts point out the eurozone stocks are underowned, after stocks have dropped 20% in U.S. dollar terms over the past 18 months.

Eurozone sector price-to-earnings ratios are “close to outright” cheap territory. While the economy has been, yes, poor, the JPMorgan analysts say the M1 measure of money supply has been improving, which tends to lead purchasing managers index readings by two to three quarters.

Plus, the expectations for stimulus are low. “Given the current activity weakness, Brexit and trade uncertainty, and the mounting political pressures on core Europe from anti-establishment, we think that it might not take much for some encouraging news on this front,” they say.

The analysts are also optimistic that there could be a reversal in the underperformance of eurozone vs. U.S. banks.

The broader market move — away from growth and into value — could be a help for the eurozone, which is heavy on the latter and lean on the former.

In dollar terms, the Stoxx Europe 600 SXXP, +0.28%   has dropped by about 4% over the past 52 weeks, compared with a 3% rise for the S&P 500 index SPX, +0.53%  .