U.S. equities vs. European equities? Who is winning?

In this week’s video update:

  • U.S. equities and the Trump election: Is the honeymoon over?
  • Earnings season kicks in. What should investors focus on?
  • European equities: Is their performance beating the U.S. market?

U.S. equities vs. European equities. Who won December and who will win January? In this week’s episode, Chief Investment Strategist Erik Ristuben gave the play-by-play. Erik was joined by Todd LaFountaine, program director, advisor insights.

Is the honeymoon over?

LaFountaine began the episode referencing the honeymoon period U.S. stocks have enjoyed since Trump won the presidential election in early November 2016. Ristuben noted that honeymoon might potentially come to an end. According to Ristuben, the U.S. market has moved to a show-me phase, and needs Trump to prove the value of the optimism currently priced into the market.

Shifting to the kick-off of fourth-quarter earnings season, Ristuben noted that while that backwards-looking data is important, Russell Investments’ strategists are paying even closer attention to how CFOs and corporations are projecting the impact of a strong U.S. dollar and wage inflation on their future profitability. Ristuben reminded investors that, “at the end of the day, what prices stocks is how much money you make as a company in the long run.”

Europe vs. U.S.: The equities outlook

Turning to the rest of the world, global economic data has been strong, with the global composite Purchasing Managers Index (PMI) at a 67-month high. This, along with other economic data, has caused Russell Investments’ strategists to raise 2017 annual economic growth projections from 1.5% to a range of 1.5-2%, with Ristuben stating, “We like Europe as an overweight position.” (For more information on 2017 projections, be sure to see Russell Investments Global Annual Outlook.)

One key figure Ristuben noted: The European Stoxx 600® beat the S&P 500® in December. So far in January, the Stoxx 600® is winning that contest again. Ristuben stated that he thinks that trend will continue, but not without volatility.

Watch the video now.

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