On equities, Europe remains preferred
Earnings season confirms our preference for Europe, writes Christoph Riniker, Head Equity Strategy Research, Julius Baer
While absolute earnings growth figures in Europe and the US are roughly on similar levels, the positive surprise is much more pronounced in Europe. The same applies to sales figures, which are in line in the US and positively surprising in Europe.
A comparison of the performance between US and European equities over the last 12 months shows that European performance was substantially driven by earnings growth and only a slight increase in the price-to- earnings ratio, while in the US earnings support is much lower and valuation expansion plays a bigger role.
We confirm our fundamental preference for Europe. Given the overall constructive view for equities, we see no reason to make any major changes at the moment.