Initially, this was manifested in a strong decrease in prices, but as the excessive reactions were priced out, a rise took over, much to the delight of investors.

Ferenc Füleki, Senior Portfolio Manager at Generali

Several factors and influences have played a role, but perhaps in retrospect, it can be said that the profit generation of companies has not fundamentally changed, nor has the demand decrease caused serious problems, while domestically, extra profit taxes have also burdened several sectors. It is commonly said that during economic downturns, spikes in inflation, surges in interest rates, and naturally, stock market downturns, it is advisable to buy stocks for the long term. Of course, this is easier said than done, as one tends to read a lot, watch various videos, and, due to the conflicting opinions, many miss out on the best opportunities. However, this does not mean that the train has left the station.

Is it still a good time to start buying stocks now?

The answer to this question, as is often the case in the financial and capital markets, is not a simple "yes" or "no." It is more worthwhile to think in terms of probabilities. It might be useful to review the pricing of regional or major stock indexes to see on what multiples the indexes are trading. It is not productive to directly compare the P/E ratios of the stock indexes, as the sector weights do not match, and profitability varies within the sectors. The only solution is to somehow normalize. For example, we can compare the current P/E ratio to the forward-looking P/E ratio to find the most undervalued index. This is a kind of "non-classical" "mispricing," more of an expectation.

Yet, the story does not necessarily end here, as we feel that there are significant differences between countries, whether in interest rates, inflation, but most importantly, in growth and riskiness. If we also adjust the P/E ratios back for these and compare the obtained fair P/E to the current one, we get a slightly different picture. However, since growth can be measured not just by real growth but also by EPS growth, I calculated this:

The greener something is, the cheaper it is; the redder, the more expensive. However, there is a catch. Just because something is expensive, it can still become more expensive, and vice versa. Nonetheless, investors typically like cheaper stocks, so the odds are in our favor if we aim for this. The region (CETOP), BUX, the Czech market (PX), the DAX for example, are particularly interesting, but we wouldn’t make a big mistake by also getting some exposure to the US market, despite it appearing expensive. This is because if the earnings season is strong, then these indicators won't seem so expensive after all!