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Van Lanschot Kempen Upgrades EU Equity Allocation, At Expense Of US IG Credit

2024-06-17 17:55:23.633000

UBS recently shifted its preference to European stocks over U.S. stocks, based on a comprehensive analysis of key indicators. The pivot is driven by the anticipated convergence of economic momentum between the United States and Europe, with potential upside risk to European GDP growth and downside risks for the U.S. economy. Monetary policy dynamics, including lower interest rates in Europe compared to the U.S., also contribute to the preference for European equities. Valuation considerations, such as attractive equity risk premiums and sector-adjusted price-to-earnings ratios, further support the case for European stocks. Additionally, earnings momentum, diverse industry-leading companies, and robust profit margins in Europe contribute to the appeal of European equities. UBS's strategic shift highlights the importance of agility and adaptability in navigating global equity markets.

Danish-headquartered online trading platform Saxo Markets suggests that Australians should consider investing in European equities. Saxo's head of equity strategy, Peter Garnry, highlights three reasons to invest in European equities: 1) Investor sentiment is improving on the European economy, with positive signs of growth and decreasing energy prices. 2) European equities offer a lower P/E ratio and better sector diversification compared to US equities. Garnry mentions rising stars in the European market, such as Novo Nordisk and SAP SE. 3) Geopolitical tensions, including the ongoing war in Ukraine and Middle East tensions, have driven European defence stock returns. Saxo has seen a significant increase in the number of clients investing in European defence stocks. Saxo Markets provides access to 18 European equity markets and offers multi-currency accounts to save on foreign currency fees.

Mark Denham, head of European equities at Carmignac, argues that European stocks, which have historically played second fiddle to their US counterparts, now present an opportunity for investors. Denham believes that the significant discount at which European stocks trade compared to US stocks creates a chance to add high-quality names to portfolios.

Van Lanschot Kempen has also increased its equity allocation, particularly in European equities, due to reasonable valuations and an improved economic outlook. The firm believes that the European economy is recovering from the negative shocks of the coronavirus pandemic and the war in Ukraine. Joost van Leenders, senior investment strategist at Van Lanschot Kempen, expects the European Central Bank to cut interest rates, which could further boost equity prices. The firm also holds a small overweight in US equities, despite the risks posed by the slowing US economy and higher valuations. Van Leenders has a neutral position in Pacific and emerging markets. To finance the acquisition of European equities, Van Lanschot Kempen is selling US investment grade credits, increasing its underweight in this asset class. The firm prefers government bonds and holds an overweight in US government bonds. Van Leenders is cautious about high yield credits and has a neutral position on emerging market debt. He views real estate and commodities with uncertainty. [be01baa0] [929dca73] [2627a952] [21502734] [fa62ac74]

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