Core Viewpoint - The European stock market has priced in too much optimism, and Bank of America predicts a potential decline of about 10% for the Stoxx 600 index, with cyclical stocks possibly dropping around 15% compared to defensive stocks [1][7]. Group 1: Market Performance - Despite a previous period of optimism, the relative performance of European stocks against the MSCI global index has largely reversed since mid-March [2][3]. - From December 2024 to March 2025, the Stoxx 600 index outperformed the MSCI global index by nearly 15% due to a shift in market sentiment and expectations regarding fiscal stimulus in Germany [2][3]. Group 2: Economic Factors - The market had overly high expectations for European economic recovery in March, which did not materialize as anticipated, leading to a correction in stock prices [4]. - The nominal effective exchange rate of the euro has increased by approximately 7.5% since February, negatively impacting the earnings of export-oriented European companies and lowering stock valuations by 8-9% [5]. - The resurgence of growth stocks in the U.S. has diminished the attractiveness of European value stocks, which have historically outperformed growth stocks in Europe [6]. Group 3: Future Outlook - Bank of America has downgraded its rating on European stocks from "overweight" to "neutral," citing that the current valuations have already factored in too many positive developments, limiting the potential for further gains [7]. - The forecast for the eurozone indicates nearly zero growth by the second half of 2025, which poses systemic risks to global growth, particularly affecting export-driven economies like Europe [7].