Eq: Dev ex-US

(New York)

JP Morgan put out an interesting recommendation to investors recently. They said the best place to make money in the recovery might not be in the US, but rather in international stocks. According to Gabriela Santos, global market strategist at JP Morgan Asset Management, “When you have a cyclical recovery like we expect in 2021, it’s really international’s time to shine … We think it’s really important for investors to have a balance between U.S. equity exposure and international exposure as we go into the year of the vaccine for 2021”. The key argument here is that international indexes are more dominated by cyclical stocks than tech, and those are the share poised to really gain as the vaccine plays out.


FINSUM: This is all pretty basic. International indexes have not recovered as much as US stocks, and are composed of companies that are likely to start outperforming at this stage of the recovery. Europe in particular seems to be a good bet.

(London)

US market valuations are eye-watering. By several measures the S&P 500 is as richly valued as it has ever been. With that in mind, overseas stocks, especially in Europe, appear to be a good bet. For example, while US stocks are now well ahead of their pre-COVID peaks, the Stoxx Europe 600 is still down 9.2% since its high in February. Since March, the S&P 500 has rebounded by 60% while the Stoxx Europe 600 has only seen a 40% rise.


FINSUM: So European benchmarks are more exposed to the banks and industrials, which were more hurt by COVID than US tech companies, which dominate American benchmarks. That said, now that a vaccine is in site, there is a big chance for appreciation in Europe that seems much less likely to occur in the US.

(Berlin)

US investors are growing increasingly interested in European equities. The reasons are many. Europe has undertaken huge levels of stimulus and its economy seems to be recovering from the pandemic more quickly than the US’. Further, the Stoxx Europe 600 is still down 10% on the year versus a 6% rise in the US, which means continental stocks may have more room for gains. Another interesting aspect to note is that the continent’s mix of equities has changed markedly over the years and is no longer dominated by banks. This means higher trending earnings and less volatility.


FINSUM: So you have an economy that might get out of recession faster than the US and returns that are 16 points behind, all with very accommodating monetary and fiscal policies. Investing in Europe makes sense!

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