There are opportunities in European stocks despite their record streak, strategist says.
The wide base Euro Stoxx 600 hit a record on Thursday, surpassing its February 2020 levels as earnings season kicked off and investors pondered some key inflation data in Germany and France.
But investors could have a chance to take advantage of low expectations for Europe’s economic recovery and vaccine rollout, Chantico Global founder and CEO Gina Sanchez said Thursday.
“It’s a very, very attractive price because most investors imagine it’s going to be tough,” she told CNBC. “Trading Nation”. “But if you look at future expectations, the growth estimates coming out of Europe are actually, even for Europe, very strong.”
Exports are expected to grow by 8% this year and 6% next year, she said, adding that the Stoxx 600 index held many companies that drive this part of Europe’s economy.
“If you look at the prices of these companies, you’re looking at significantly higher expectations than the US, but you’re trading at a discount,” said Sanchez, also chief market strategist at Lido Advisors.
“So there is currently a significant discount to buy European opportunities which will likely grow as much if not more than some of their US counterparts.”
It may not be more than a catch-up trade, however, warned Craig Johnson, senior technical research analyst at Piper Sandler.
While the Stoxx 600 breakout is “constructive on an absolute basis, … it still sort of lags on a relative basis” when compared to US stocks, Johnson said in the same “Trading Nation” interview. .
“If the capital is going to the most attractive opportunities that are working right now, it’s still here in the United States, from our perspective, at this point,” he said.
Although European stocks are cheaper on a valuation basis, the US market is more likely to prevail, with the economic recovery here apparently outpacing those overseas, Johnson said.
“Looking at momentum trends and where we’re going to get the most price appreciation right now, I’m sticking with the US even though you see Europe playing this catch-up trade. I think the US States have the best growth and the best innovation right now,” he said.
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