Equities
Trump will pull back from the trade war when stocks approach bear market territory. He will not withdraw from NATO. Favor European stocks on fiscal policy.
Investors see Europe as a museum: A continent stuck in the past, with no ability to innovate, much less generate profits. But is this view accurate? In this report we argue that the structural headwinds to European profitability are a thing of the past. Political change and improving sentiment are also a tailwind for Europe. Meanwhile, in the US, economic uncertainty brought about by Trump’s policies have reversed the surge in animal spirits that followed the election. All of this is happening within the context of weakening growth. We upgrade European equities from neutral to overweight and downgrade US equities from neutral to underweight.
Europe’s resilience to global liquidity deterioration isn’t a fluke—it signals a structural shift. Our latest report explains why the decline in precautionary money demand marks the end of Europe’s liquidity trap and what it means for investors.
This week, our three screeners cover equity plays in European Banks, US Financials, And US Stocks that are “Grave Diggers”.
The tariffs on Canada and Mexico will come into effect as scheduled while the tariffs on China will be doubled. In the Middle East, Iranian response to any attack will threaten Middle Eastern oil supply. Meanwhile, Chinese fiscal support will surprise to the upside at the Two Sessions. But Trump's China policy will cause volatility. Now that the stock market is cracking, reinitiate defensive trades, such as long treasuries versus US stocks and long global defensives versus cyclicals.
