Betting on European stocks as the global economy reopens
LOS ANGELES (AP) — Much of Europe remains off limits to American tourists because of the pandemic, but the region is looking like an attractive destination for stock investors.
While eurozone stocks remain in a slump relative to the U.S. stock market’s record-shattering rebound, they could be poised for solid gains as the global economy continues to reopen, analysts say.
Energy, materials and industrial companies tend to do better when the economy is emerging from a downturn, and are likely to see improved earnings as businesses reopen. And Europe has a bigger share of stocks in these categories than Wall Street.
These types of companies, known as cyclical stocks, also tend to benefit when inflation rises, something that analysts expect will happen as the global economy strengthens.
“When we move from surviving the pandemic to thriving in the rebound, European stocks ought to do better,” said David Kelly, chief global strategist, J.P. Morgan Asset Management.
Betting on stocks that rely on a growing economy may sound unwise in the middle of a recession and pandemic with no clear end in sight. That's why investors this year have doubled down on tech companies that provide everything from streaming video, internet access, smartphones and other electronic devices that people stuck at home due to the coronavirus have come to rely upon.
But the reopening of businesses in Europe, massive government spending and the phasing out of restrictions on public life have stoked expectations that the region’s economy will recover more rapidly than the U.S.
“The region sports a robust health infrastructure, exposure to a pickup in global growth and galvanized policy response with room for more stimulus,” BlackRock investment strategists wrote in a research note last...
