Time to dump U.S. stocks?

Time to dump U.S. stocks?

Time to dump U.S. stocks? Every dog has its day which is why some investment gurus are suggesting investors switch directions moving from U.S. stocks which are looking expensive to those in Europe where a number of tailwinds have them positioned for growth as we head into the final quarter of 2015.

"U.S. stocks are currently trading at relatively high multiples but earnings growth is likely to be sluggish as margins are already toppish, the dollar is strong and rates are about to rise," wrote SocGen in a note to clients. "France and Italy look set to benefit in particular from implementation of reforms. All these drivers should support European equities out to 2017."

SocGen believes European equities have five things in their favour heading into the fourth quarter: ECB quantitative easing, a deceleration in the pace of austerity measures, structural reforms to countries in need of them such as Spain and Italy, the implementation of an EU infrastructure plan and spillover benefits from a stronger U.S. economy.

How high will European equities soar? SocGen believes the top 50 stocks, represented by the Eurostoxx 50 index, will jump 7% in Q4 alone.

The combination of a European recovery with stock prices that have barely budged (Stoxx Europe 600) in 2015, up just 3.5% year-to-date, European equities are trading at just 14.4 times forecast earnings, 15% cheaper than in April.  

"Europe stands out as the undeniably positive story this year, with solid (albeit slow) growth driven primarily by domestic demand and an accelerating periphery," Deutsche Bank said in a note last week.

Is it time to take clients overseas?

Analysts think so. 
  • nageswar rao jillepalli 2015-09-18 12:47:53 PM
    I fully agree with your comments. In fact I have been adding European exposure to client portfolios since last year with good results.
    European mid cap mutual funds are doing very well.
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  • Robert Roby 2015-09-18 2:42:12 PM
    Absolutely poor advice for long term investors. If the advisor has done their job then investors will already be well exposed to foreign stocks. In addition, unloading US stocks ? Most US companies are mutlinationals and by default provide excellent foreign exposure not to mention rising dividends in many cases. Crystal balling is just silly.
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