The MSCI EMU index of euro-zone equities outperformed the MSCI USA index through most of the first quarter of 2021. However, since April, eurozone equities have lost ground against their US peers again. While economists at Capital Economics expect the economic recovery in the eurozone to be slower than that in the US, they still anticipate that the MSCI EMU will outperform the MSCI USA in the remainder of the year.
MSCI EMU to rise by ~3% between now and end-21
“We think the rotation towards sectors that were hit hard by the pandemic, like energy and financials, will resume.”
“We expect the gap in the performance of individual sectors between the US and eurozone to narrow as the euro-zone economy gradually reopens later this year. While a lot of good news on the economy appears to be already discounted in the US, we suspect this may not be the case in the eurozone.”
“We anticipate that in the US the prospect of higher corporate tax rates and possibly, an increasing focus of regulators on anti-trust issues, will be a headwind for equities.”
“We think that valuations could increase somewhat in the euro-zone as appetite for risk rises further, but not in the US, where they generally look more stretched.”
“We forecast the MSCI EMU to rise by ~3% between now and end-21. This compares with a projected increase of less than 1% for the MSCI USA.”
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