European equities to lag behind US and emerging market stocks – Natixis

Like all other equity markets, the European equity market will be boosted by the expansionary monetary policy. However, this market will suffer from two disadvantages, the lower weight of technology companies compared with the US and tthe low potential growth in the eurozone compared with the US and emerging countries. European equities are therefore likely to rise, but less than US or emerging market equities, according to analysts at Natixis.

Key quotes

“Like all other equity markets, the European equity market will be boosted by the expansionary monetary policy (low interest rates, abundant liquidity that will be partly reinvested in equities). This upward move in the European equity market, linked to the abundance of liquidity reinvested in equities as risk aversion decreases has actually begun.”

“The European equity market is lagging behind the US equity market and emerging equity markets. This is due to two disadvantages of the eurozone compared with the United States or emerging countries. Compared with the US, the eurozone’s first disadvantage is the lower weighting in Europe of technology companies, whose market value has soared. Compared with the US and emerging countries, the second disadvantage is the low potential growth in the eurozone. Potential growth over the decade 2020 will be around 4% in emerging countries, 2% in the US and - 1% in the euro zone. This will rather drive investors to other regions, not to Europe.”