John Bilton, a strategist at J.P. Morgan Asset Management, has offered a compelling outlook, forecasting that European equities are set to outshine their U.S. counterparts in the next 10-15 years. This bullish prediction is grounded in several key factors, including an overvalued U.S. dollar, more attractive initial valuations, and the promise of higher overseas dividends.
In contrast to the robust 277% lead the U.S. market had enjoyed over the last 14 years, marking its most significant period of outperformance since 1971, it encountered a stumbling block in the form of rapid inflation and soaring interest rates last year. Meanwhile, the Euro STOXX 50 posted a remarkable 14% growth over the past year, surpassing the performances of both the S&P 500, which managed a 10% gain, and the Dow Jones Industrial Average, with a more modest 4.4% increase.
Bilton advises dollar-based investors to consider diversifying their portfolios by integrating international stocks into their investment strategies, a move that could potentially bolster their returns. He anticipates an average annual return of 8% for euro area equities over the next decade. By comparison, equities in Japan and the U.K. are expected to yield 7.6% and 6.9%, respectively.
While the U.S. remains a thriving hub for technology stocks, J.P. Morgan’s report suggests that defensive stocks, including consumer staples, healthcare, and utilities that offer steady dividends, are more prominently featured outside the U.S. This evolving trend is likely to have a substantial impact on global investment strategies in the coming years, as investors increasingly aim to optimize returns while managing risks.
