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22 Mar 2021 | 12:52

JP Morgan stays at 'overweight' for euro area stocks

(Sharecast News) - Strategists at JP Morgan reiterated their 'overweight' stance on Eurozone and Japanese equities in 2021 and said they continued to expect that they would outperform shares on Wall Street. To back up their investment thesis, they pointed to the ongoing rotation from 'growth' to 'value' stocks and argued that the relatively slower pace of vaccinations in Europe was already priced into stocks.

Worth noting, investor sentiment was generally of the opposite opinion, anticipating instead that growth in the US was set to again "handsomely" beat that in Europe, they added.

Yet, as they also highlighted, year-to-date MSCI Europe was up 7%, versus 4% for the equivalent US gauge.

Europe was a classic so-called 'Beta' play on the global macroeconomic cycle, they explained.

That meant that the "firmer" US dollar and "relative rollover" in the Chinese credit impulse "might not bode well for a continued run in

commodities/global cycle plays."

Hence, for example, their recent decision to downgrade Miners.

Nonetheless, what mattered was the Value/Growth tilt.

"If Banks are performing better vs Tech, then Eurozone has a fighting chance to outperform."

Furthermore, even if the growth gap between the two regions did not close, "it will for sure narrow significantly".

"Eurozone PMI is likely to turn up vs US, and it usually correlates well with relative regional performance," they added.

"The relatively slower vaccinations pace might not penalize Europe much from here, as this is to some extent already reflected in the equity market."

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