There’s opportunity in European stocks despite their record streak, according to one strategist.
The broad-based Europe Stoxx 600 hit a record high on Thursday, rising above its February 2020 levels as earnings season kicked off and investors mulled over some key inflation data from Germany and France.
But investors may have a chance to take advantage of low expectations around Europe’s economic recovery and vaccine rollout, Chantico Global founder and CEO Gina Sanchez said Thursday.
“It is very, very attractively priced, because most investors are imagining that it will be challenging,” she told CNBC’s “Trading Nation.” “But if you look at the forward expectations, growth estimates coming out of Europe are actually, even for Europe, very strong.”
Exports are expected to grow 8% this year and 6% next year, she said, adding that the Stoxx 600 index holds many of the companies driving that portion of Europe’s economy.
“If you look at the pricing for those companies, you’re looking at expectations that are significantly higher than the U.S., but you’re trading at a discount,” said Sanchez, also chief market strategist at Lido Advisors.
“So, there’s a significant discount right now for buying European opportunities that are probably going to grow just as much if not more than some of their U.S. counterparts.”
It may not be more than a catch-up trade, however, warned Craig Johnson, senior technical research analyst at Piper Sandler.
While the Stoxx 600’s breakout is “constructive on an absolute basis, … it’s still sort of a laggard on a relative basis” when stacked against U.S. stocks, Johnson said in the same “Trading Nation” interview.
“If capital’s going to go to the most attractive opportunities that are working now, it’s still here in the U.S., from our perspective, at this point in time,” he said.
Though European stocks are cheaper based on valuation, the U.S. market is likelier to win out with the economic recovery here seemingly outpacing those abroad, Johnson said.
“Looking at the momentum trends and where we’re going to get the best price appreciation right now, I’m sticking with the U.S. even though you are seeing Europe playing that catch-up trade. I think the U.S. has the best growth and the best innovation right now,” he said.
