Investors are seeing a brighter future for European markets, strategist says

well on one hand it could be a bit surprising I mean we look at Global growth we don't focus on how great growth is in Europe and yes the numbers were better than expected but we're still at a relatively low rate uh I think there's an anticipation on one hand of cuts coming from the ECB which is going to be ahead of the Fed so that's good uh and that better than expected growth so as equities do we're looking towards a future I think generally speaking investors are seeing a brighter future ahead for European markets and they're reflecting that now so what investors and what they're doing is quite key here because we know they've been driving up us markets we've seen some huge valuations on certain stocks as well is this breadth coming into the mix here investors are seeking out other assets that might have been left behind or is it something specifically European around the earnings and the macro I think there's generally a global factor and as far as the breadth is concerned I mean it's changed a bit recently with the movement in interest rates but you've actually had most markets moving up you know in similar trajectory so if you look at wrestle value in the US even compared to NASDAQ compared to Europe they've been within a similar range so I think there is this very key global factor and then we go into some of the things that are specific to Europe because now you do have Europe outperforming a lot of other markets which you don't say very often uh so hopefully those factors will continue it's really going to come back frankly to what the next us data that we get and whether or not then you see us equities also start to leg up much more than they have recently um let me go back to an old hobby horse of many especially those companies looking to list is that you just don't get the same bang for your buck on European equities well given we got a global in Vestor base as well um why should European equities be trading at a discount to their peers they they always do yeah but why should they be uh what I think fundamentally it comes down to earnings growth uh you just don't get generally speaking the same earnings growth in European corporates the way you do in the US so certainly if you look at usth of the continent uh I think a part of it is is going to be GDP growth I it's just much more differences a management style labor market regulation and so on but it always comes down to what's the price you're paying for that growth if you pay a relatively low price for relatively low growth you know that may still be a better investment in the long run so it's I think it's as much the relative multiple what are you pay and say for us growth versus European growth and right now that's actually a fairly wide Gap if interest rates are cut this year and I say that with respect to our Swiss and Swedish friends because they've already got their Cuts as well or the first part of their Cuts as well if the ECB the bank of England and the Federal Reserve are going to cut let's say one or two times each let's be quite conservative about this as well some people think three or four but let's say one or two across the board as well is that enough to keep the equity story on the uptic or actually will it Propel it because people start looking at the relative value of equities compared with some of the the other stocks out there or other assets out there uh it certainly should on a relative basis you're right you're going to see a lower discount rate that should be higher prices it'll come down to what's happening then on the grow side so we can kind of fact figure out what the implication is of the earnings uh excuse me of the interest rate change uh I think what we're all still struggling with is at what point given that we've have had and will have still relatively High interest rates for a while we know monetary policy works with the lag do we see a a bigger slowdown of growth later on and that's still very much an open question uh a risk to that Outlook the positive outlook for equities but if that doesn't happen if it's a nice recovery in Europe then really that's a pretty nice combination

Channel: CNBC International TV

Views: 341

Keywords: Squawk Box

Id: BoqbaPMs1CE

Length: 3min 26sec (206 seconds)

Published: Fri May 10 2024