Waiting for euro stocks turnaround a waste of time for JPMorgan

HONG KONG: Investors holding out hope that this will be the year European stocks finally outpace their American peers are in for yet another round of disappointment, according to JPMorgan Asset Management.

“The argument has been that it has underperformed price wise and underperformed earnings wise, and surely at some point it needs to catch up,” Patrik Schowitz, global multi-asset strategist at JPMorgan, said in an interview in Hong Kong on Monday. “Clearly, Europe hasn’t managed to do that. Earnings have done well, but they’re not better than elsewhere.”

Share-weighted earnings growth for the Stoxx Europe 600 Index is forecast to advance 5.2% year-over-year in 2018, while the S&P 500 Index is projected to jump four times faster, data compiled by Bloomberg show. To be sure, the US benchmark gauge benefits from tech earnings, which are forecast to rise 31% this year.

Even so, bullish calls on European equities have found little success in the years following the sovereign debt crisis despite the monetary stimulus, a weak currency and the region’s economic rebound. Europe is one of the “less preferred” markets for JPMorgan as it scouts for opportunities in the US and emerging markets, Schowitz said.

“The more you dig into this outperformance argument the less solid it looks,” he said. “That’s one we’re pushing back against.”