Financials-heavy markets see heightened interest
Global equity investors are finding financials-heavy European markets more alluring than their U.S. counterparts packed with expensive technology stocks in their rush for better returns amid growing signs of interest rates staying higher for longer.
Looking at the broader market, the STOXX 600 has added nearly 7.5% in 2023, more than double the 3.4% gain in the S&P 500, marking its strongest performance versus the U.S. benchmark since 2017, according to Refinitiv data. “It’s been a good few months for Europe relative to the U.S., but there is more room for this trade to run over the course of 2023,” said Hugh Gimber, a global market strategist at J.P. Morgan Asset Management.Even though Russia’s year-old invasion of Ukraine sent the cost of natural gas and electricity to record high and pushed the region to the brink of a recession, Europe’s economy is looking a lot less fragile.
The Paris stock market, which houses premier luxury names including LVMH, Kering and Hermes International, has benefited more from China demand as its economy emerges from a strict pandemic-related lockdown. “The resilience of the consumer is evident with the recent economic data, and largely in Europe over the U.S. because we’re starting to see deterioration in some of the consumer gauges in the U.S.,” Cooper said.On the valuation front too, the European stock market is much cheaper than the U.S. The STOXX 600 trades at about 13 times its 12-month forward price-to-earnings ratio, while the S&P 500 trades at some 18 times.
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