After the crisis global financial, US actions “they recorded extraordinary returns. But this year marks a change. For the first time in over a decade, the European actions have definitely overperformed the US ones, a potential signal that the era of US domain has reached a break, if not even at the end. Figure 1 shows the historical trend of regional share leadership. ” Nick KingHead of Etfs of Robeco
Has the market leadership of US actions come to an end, at least for now? To answer this question, through a graphic designer, the relative performance of the USA MSCI index is shown to the MSCI Europe index. A new cycle begins after the peak of the market that has subscribed previously, once the market it has submitted previously it overperformed at least 20% compared to the previous minimum. Performance is based on the total late month return indices in USD.
Global exposure to interesting evaluations
The share qualifications eUropei with great capitalization – explains the expert – offer a global exposure balanced to interesting evaluations. The companies included in the MSCI Europe index carry out 60% of their revenues outside Europe and the sectoral composition of the index is more balanced than the S&P 500 index, strongly oriented towards the technological sector. In addition, European share qualifications are more convenient, both in relative and historical terms, compared to US counterparties.
The Region continues to be exchanged with a discount compared to the US market, and many investors consider it an interesting entrance point. The US equity market has a clearly different sectoral composition, with greater emphasis on the sectors oriented towards growth, such as computer science and health. This naturally leads to structurally higher assessments, especially when using traditional metrics such as the price/accounting value ratio, which tend to be less information for growth securities.
Although we believe that theand European actions aBbiano relatively interesting evaluations, we do not consider the only evaluation of a reliable tool for short -term timing. Instead, we believe that the increase in exposure to European actions is better supported by three structural factors:
- the balanced and diversified nature a global level of the MSCI Europe index
- the risk of concentration in Benchmark weighted for the capitalization of the global market
- The potential reversal of the persistent deceased by active European shareholders.
Global benchmark are now distorted
Today’s global benchmark TheIn terms of geographical exposure: the MSCI ACWI has a weight of 63% in US securities against only 17% in western Europe, in stark contrast to 15 years ago, when the distribution was 40% in the United States and 28% in Europe. For investors looking for a more diversified geographical exposure, the Equally Weighted indices and the regional rebalancing deserve renewed attention. Interestingly, when examining Equal-Weighted indices, the regional imbalance disappears largely. The clear contrast between the two highlights the disproportionate influence of a limited number of US mega-chaps on the standard index, raising valid concerns about its level of diversification.
Europe is little loved and underweight
In the last ten years, the European share strategies aTiva have recorded cumulative deceased equal to 75 billion euros. However, financial history teaches us that the smaller the public, the bigger the miracle is. With the sentiment to the minimum, the influx of new capital towards European actions could trigger a long -term turnaround. At the same time, we are witnessing a growing interest in active ETFs, which combine the advantages of active management with the lowest commissions typically associated with passive investments.
The risks
Of course, every investment opinion involves risks and there are several scenarios in which US actions could continue to overperform or, on the contrary, in which European ones could remain behind. There first concern It is partly mitigated by the global exhibition of revenues of most European companies with great capitalization. In addition, the slowest economic growth in Europe is not new: it is a factor known for years and is probably already obvious in the assessments. As for the second point, although the United States are currently at the forefront of innovation in the field of artificial intelligence, many of the best positioned titles are already exchanged at high evaluation levels, making it difficult to predict to what extent this trend can continue. Finally, the impact of geopolitical instability on European corporate profits is intrinsically uncertain and difficult to quantify.
We don’t deal with Market Timing And the movements of short -term regional allocation are notoriously difficult. However, on the basis of the previous arguments, including the balanced and diversified nature of European actions, the risk of concentration in global benchmark and historically low allocations to active European strategies, we believe that “increase exposure to European actions represents a decision of Iprudent long -term preparation “.
