AFP via Getty Images
It’s time to shift more money to European stocks, according to a leading fund manager.
RBC Wealth Management, the investment arm of the
upgraded its view on European stocks to overweight.
The first reason has to do with earnings—with European companies easily beating market expectations during the first quarter. “As macroeconomic momentum builds, earnings delivery is strong and both management and consensus forecasts are being revised upwards,” said Frédérique Carrier, head of investment strategy.
European equities typically outperform when bond yields rise, she added, as they are more exposed to groups and sectors that are beneficiaries of increasing yields. Plus, European companies trade at a 20% discount to the S&P 500 when looking at 2022 expected earnings.
“Europe is a global leader in industries geared towards the green economy, ranging from renewables operators and green transportation to electrification and industrial automation. Companies in the financials sector remain attractively valued, in our view, and are seeing positive consensus earnings revisions,” she added.
RBC isn’t the only investment house bullish on European equities, and investors have noticed. According to State Street Global Advisors, U.S. investors have put more money into European stock exchange-traded funds in May than any month since March 2015.
