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USA vs. Europe: Stock investors face an important decision – valuation differences explained
According to a report from www.focus.de, the question is whether the US or European market offers better opportunities for equity investors. Traditionally, US stocks are valued more expensively than European stocks. The valuation premium of the US leading index S&P 500 compared to the European stock market barometer Stoxx Europe 600 is currently over 60 percent. However, overvaluation of US stocks is also a question of perspective. Historically, the price-earnings ratios of the European index and the S&P 500 have been above and below their respective averages. The article notes that artificial intelligence hype has boosted US tech giants this year, while European stocks...
USA vs. Europe: Stock investors face an important decision – valuation differences explained
According to a report from www.focus.de, the question is whether the US or European market offers better opportunities for equity investors. Traditionally, US stocks are valued more expensively than European stocks. The valuation premium of the US leading index S&P 500 compared to the European stock market barometer Stoxx Europe 600 is currently over 60 percent. However, overvaluation of US stocks is also a question of perspective. Historically, the price-earnings ratios of the European index and the S&P 500 have been above and below their respective averages. The article points out that artificial intelligence hype has boosted US tech giants this year, while European stocks have barely benefited.
An analysis of the current analyst consensus shows that an average profit increase of 0.7 percent for European companies and 11.0 percent for US companies is expected for the fourth quarter of 2023. Higher profit growth is also forecast for American public companies in the coming year. Nevertheless, investors should be careful when investing in the US. There is a risk of a downward revision of the profit forecast and possible price losses. In addition, the US Federal Reserve could increase the key interest rate and surprise the market. Currency losses due to a potential weakness of the US dollar should also be considered.
In summary, US stock prices appear to be pricing in the best of all worlds at the moment, while in Europe it is the other way around. The risk of negative surprises is therefore higher on Wall Street than on the European markets. Cautious investors should underweight US stocks in their equity portfolio and consider the European market, particularly due to higher dividend yields.
Source: https://www.focus.de/finanzen/boerse/wirtschaftsexperte-wiwo-der-risktest-darum-sollte-man-als-anleger-us-aktien-missertrachten_id_26509987.html
Read the source article at www.focus.de