A struggling U.S. stock market will next year have to contend with relatively attractive European equities after a recent shift toward value stocks,...
A struggling U.S. stock market will next year have to contend with relatively attractive European equities after a recent shift toward value stocks, according to RBC Capital Markets.
“Valuations relative to Europe are another problem for the U.S. equity outlook in 2023,” said Lori Calvasina, head of U.S. equity strategy at RBC, in a research note Monday. Also, with value stocks outperforming growth equities, she said “a leadership shift back to value should, in theory, be accompanied by a shift in leadership back to non-U.S. equities.”
According to RBC’s research note, the performance of U.S. large-cap growth stocks relative to value had been “positively correlated” with the performance of U.S. stocks relative to equities outside the country — before recently diverging. The S&P 500 has been pummeled this year by rising interest rates as the Federal Reserve tightens monetary policy to combat high inflation in the U.S.. In 2022, the index has dropped 17.5% through Friday, with investors now worrying about the potential for a recession in 2023 as well as the future path of Fed rate hikes.Still, the U.S. stock market appears “extremely expensive” compared to stocks in Europe, according to RBC.
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