J.P. Morgan Sees European Stock Comeback, Citing ECB Rates and ETF Interest
US stocks have consistently outperformed their European counterparts over the years. However, J.P. Morgan strategist Tilmann Galler sees a potential turnaround, with European stocks poised for a comeback. He believes investors could benefit from overweighting Europe in their portfolios.
Galler points to the ECB's room for further interest rate cuts, which could boost European stocks. He also highlights the appeal of European small cap stocks and the growing interest in European equity ETFs, particularly those focusing on small-cap stocks and ESG considerations. These ETFs, such as Amundi Stoxx Europe 600 UCITS ETF, iShares MSCI Europe UCITS ETF EUR, or Vanguard FTSE Developed Europe UCITS ETF, have seen strong inflows and innovation in recent years.
Meanwhile, US fund managers are increasingly overweighting Europe, suggesting a potential catch-up. However, a potential increase in the US budget deficit could put pressure on the US stock market. Galler also notes that US value stocks and European stocks trading at lower valuations could present interesting opportunities for investors.
Tilmann Galler's insights suggest a potential shift in market leadership, with European stocks emerging as a comeback candidate. Investors may want to consider overweighting Europe in their portfolios, particularly through ETFs focusing on small-cap stocks and ESG considerations. However, they should also be mindful of potential challenges in the US stock market.
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