European stocks are poised to continue their upward trajectory, bolstered by their involvement in cyclical sectors and more attractive valuations in comparison to their U.S. counterparts, according to Invesco AM's global head of asset allocation research, Paul Jackson.
Jackson has expressed a preference for European shares, adopting an overweight position on them while taking an underweight stance on U.S. stocks within his asset allocation strategy.
His optimism for European equities is partly driven by the expectation of a global economic rebound, which he believes will particularly benefit the region's cyclical sectors, such as energy, industrials, and banks. These sectors have already demonstrated strong performance since the beginning of the year.
In addition to sectoral performance, Jackson points out that European stocks are trading at what he considers historically low valuations, making them more appealing compared to the pricier U.S. market. He suggests that a significant amount of positive news has already been factored into the valuations of the U.S. market, which may limit their potential for further gains.
Jackson also remarks on the shift in momentum that has been observed in U.S. equities. He notes that the surge in U.S. stocks, which was initially triggered by the election of Donald Trump in November, has started to wane. In contrast, he anticipates that the momentum behind European stocks will persist, driven by strong economic fundamentals and the current state of valuations.
"We’ve got a momentum on European stocks, which in my opinion will endure, because of economic and valuation fundamentals pushing that way," Jackson stated, underscoring his positive outlook for the region's equities.
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